Rural Housing (USDA) Loans
A USDA home loan from the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, is a mortgage loan offered to rural property owners by the United States Department of Agriculture. Rural Housing loans allow homeowners to finanance closing costs and pre paid items. In some cases, they may also be allowed to finance repairs or make updates to the property. There is no minimum cash requirement for borrower at closing and the interest rates are competitive.
USDA Loans apply to more “rural” areas than you may think! They are available to millions of eligible primary home buyers with low to moderate incomes or scarce funds for down payments.
Features, Benefits and Things You Need to Know About USDA Loans:
- Zero Down –No down payment is required for USDA loans. Thirty-year, fixed-rate loans with no pre-payment penalty are the norm. Rates are very competitive with conventional loans.
- Eligible Property – These loans are limited to “rural” areas, though you might be surprised by some of the suburbs of major metropolitan areas that qualify as rural. Homes should be modest in size and cost and constructed per local codes and regulations.
- Eligible Borrowers – Funds are available for qualified borrowers who earn up to 115% of the area median income. Even candidates who have had past credit issues with late pays, bankruptcies or foreclosure may be eligible. Borrower’s income must support the proposed payments and meet the program requirements for approval. Primary occupancy is required. This program is not for investment properties.
- Benefits –Minimum cash is needed to close. The USDA Guarantee Fee and eligible closing costs may be financed. Gift money, grant money and seller contributions are allowed.
USDA home loan vs traditional mortgage
- A USDA home loan is different from a traditional mortgage offered in the United States in several ways.
- USDA loans require no down payment, you may finance up to 100% of the property value.
- You must meet the income restrictions for the County you are interested in. Each county has a maximum Income Requirement. The USDA Home Loan Program does allow for considerations for expenses like Child Care.
- To be eligible, you must be purchasing a property in a rural area as defined by the USDA.
- The home or property that you are looking to purchase must be owner-occupied, investment properties are not eligible for USDA loans.
To learn more about USDA Loans check out our Preferred Partner list here and one of our Mortgage Professionals can assist!