What is USDA Rural Development?

by on September 25, 2012

The USDA stands for United States Department of Agriculture, and it is the agency that creates USDA Rural Development programs that encourage economic development in rural areas. One purpose of these USDA Rural Development programs is to help the people living in qualifying rural areas afford better housing. Also, USDA Rural Development is the agency that is responsible for building sewer systems and bringing water to areas that do not currently have it. The Rural Development Loan program that helps people purchase houses in rural areas will be described further below.

The USDA Rural Development Single Family Housing Guaranteed Loan Program

The USDA Rural Development Single Family Housing Guaranteed Loan Program is for applicants of low or moderate-level income who wish to purchase a house in a rural area. The program offers RD loans to qualifying applicants that cover 100 percent of the purchase price of the home. Along with no down payment required, these Guaranteed Housing loans offer future homeowners terms that are highly advantageous to them, such as a low interest rate that they can easily afford.

The Terms for the Rural Development Loan

The Rural Development mortgage has a 30-year term at a fixed rate. This means that applicants will have predictable monthly payments to make for the life of the loan.

Eligibility for Rural Development Loans

The eligible applicant for a USDA RD loan is earning an income that does not surpass the designated amount set for the area. The individual or family must currently be in a housing situation that is considered to be inadequate. The applicants must also be able to afford to repay the Rural Development Mortgage as well as pay for homeowner’s insurance and the property taxes. More income requirements can be viewed here. To begin the application process, they must have decent credit histories, but USDA RD loans are not reserved only for those who have the highest credit scores.

Qualifying Housing for USDA RD Loans

Rural Development loans are designated specifically for housing that can be described as moderate. This term refers to the architecture and design of the house as well as the price. A house that is being renovated can qualify for these guaranteed housing loans, but they must meet the state’s building code and HCFP standards. Newly built manufactured housing may qualify, but previously existing manufactured housing will not necessarily be accepted for these loans.

RD loans do not have a maximum amount that applicants can borrow. Instead, each applicant’s ability to afford the property will be determined by the qualifying ratio. Generally, applicants are required to need to spend no more than 29 percent of their monthly income on the housing payment, the insurance and taxes. Furthermore, only 41 percent of their income can go toward their existing debts.

Rollover Costs as Part of the Loan

To make the purchase as affordable as possible, those qualifying for Rural Development loans can roll over any closing costs and fees into the loan if it is necessary. If the house needs to be improved, these costs can also become a part of the loan.

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