Rural Housing Loans
What is a USDA Rural Housing Loan?
USDA stands for United States Department of Agriculture. USDA rural housing loans might be right for you if you want to buy a home with no down payment and low mortgage insurance.
What kinds of rural housing loans does USDA offer?
Currently, there are two kinds of USDA loans available for single family households:
USDA Guaranteed Rural Housing Loan
USDA Guaranteed Loans are the most common type of USDA rural housing development loan and allow for higher income limits and 100% financing for home purchases. 502 Guaranteed Rural Housing Loan applicants may have an income of up to 115% of the median household income for the area. Area income limits for this program can be viewed here. All USDA Guaranteed Loans carry 30 year terms and are set at a fixed rate.
USDA Direct Rural Housing Loans
USDA Direct Housing Loans are less common than USDA Guaranteed Loans and are only available for low and very low income households to obtain home ownership, as defined by the USDA. Very low income is defined as below 50 percent of the area median income (AMI); low income is between 50 and 80 percent of AMI; moderate income is 80 to 100 percent of AMI. Click here to see area income limits for this program.
What are the advantages of USDA Mortgage versus Conventional Loans?
USDA rural housing loans offer many benefits and protections that you won’t find in other loans including:
USDA Rural Housing Loans are credit flexible
USDA mortgage guidelines are written in a way that provides the borrower the benefit of the doubt, and as long as the borrower has recovered from those circumstances in a reasonable manner and have at least a 620 credit score, they’re generally going to be credit-eligible for an USDA rural loan mortgage.
USDA Rural Loans have low mortgage insurance rates
A distinct advantage of a USDA mortgage, as compared to a conforming loan, is great interest rates and low mortgage insurance (MI). The daily USDA mortgage rates are usually comparable to a conforming 30-Year Fixed loan.
USDA mortgages are zero down home loans
USDA Mortgages have no down payment requirement.
Rural Housing Loan Eligibility:
To be eligible for an USDA Rural Housing Loan program, your monthly housing costs (mortgage principal and interest, property taxes, and insurance) must meet a specified percentage of your gross monthly income (29% ratio). Your credit background will be fairly considered. At least a 620 FICO credit score is 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). These ratios can be exceeded somewhat with compensating factors. Applicants for loans may have an income of up to 115% of the median income for the area. Maximum USDA Guaranteed rural housing loan program 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 I can borrow?
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 rural housing development 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 housing loan guarantee fee).
What is the down payment and closing costs?
A USDA Rural Development guaranteed housing loan requires no down payment and they allow for the closing costs to be included in the loan amount (appraisal permitting).
What property types are allowed for USDA Rural Housing Loans?
Rural housing loan eligibility guidelines do require that the property be Owner Occupied and can be used to purchase condos, planned unit developments, manufactured homes, and single family residences.
Can I get an USDA Rural Housing Loan after bankruptcy?
Criteria for USDA rural housing loan approvals state that if you have been discharged from a Chapter 7 bankruptcy for three years or more, you can apply. If you are in a Chapter 13 bankruptcy and have made all court approved payments on time for at least one year, you are also eligible to make a USDA Loan application.
Learn more about USDA Loans.