Rural Development Mortgage
About USDA Rural Development Mortgages
USDA RD mortgages provide home mortgage loans that suit a whole host of purchase of options. A USDA mortgage loan might be right for you if you want to purchase a home using a government loan with no down payment and low mortgage insurance.
What loan types are offered?
There are two kinds of USDA rural development mortgages currently available for single family homes:
USDA Guaranteed Loans allow for higher income limits and 100% financing for home purchases. USDA Guaranteed Loan applicants can have income of up to 115% of the median income for the area of the home. Area income limits can be viewed here. All USDA Guaranteed Loans carry 30 year terms and are set at a fixed rate. Guaranteed loans are the most popular RD mortgage today.
USDA Direct Loans are used less often than USDA Guaranteed Loans and are only available for low and very low income households, as defined by the USDA. Very low income is defined as below 50 percent of the area median income; low income is between 50 and 80 percent of area median income. Click here to see area income limits for direct loans.
USDA Rural Development Mortgage advantages versus Conventional Mortgages?
USDA rural development loans include the advantages of:
USDA Rural Development Mortgages are have flexible credit requirements
USDA mortgage loan requirements are not totally based upon credit scores, although it may be required to have a 620 FICO score to obtain approval through most lenders.
USDA Rural Loans Require low monthly mortgage insurance
A distinct advantage of a USDA Rural Development Mortgage, as compared to a conforming loan, is great interest rates and low mortgage insurance (MI). The daily USDA rural development mortgage rates are comparable to a conforming 30-Year Fixed loan.
USDA Rural Development Mortgages are zero-down home loans
It is important to ask yourself “how much can you afford“when looking for a mortgage. USDA Mortgages have no down payment requirement. Other loan programs don’t allow this.
RD Mortgage Eligibility
To be meet USDA Rural Development mortgage payment requirements, housing costs must meet a specified percentage of your gross monthly income (29% ratio). Your credit background will be considered. A 620 FICO credit score may be required to obtain an USDA approval through most lenders. You must also have enough income to pay your housing costs plus all additional monthly debt (41% ratio). Maximum income limits for your area can be found at here. Maximum USDA Direct Loan income limits for your area can be found at here.
See more on USDA Mortgage Requirements.
How much can be borrowed?
The maximum amount for an USDA home loan is determined by:
Maximum Loan Amount: The is no set maximum loan amount allowed for an USDA Residential Loan. Instead, your debt-to-income ratios will dictate how much home your can afford (29/41 ratios). Additionally, your total household monthly income must be within USDA allowed maximum income limits for your area. Maximum USDA Guaranteed Loan income limits for your area can be found at here.
Maximum financing: The maximum USDA Rural Loan amount will be 102% of the appraised value of the home (100% plus the 2% USDA rural development mortgage guarantee fee).