What is a Rural Loan?
USDA rural loans provide government insured home mortgage loans that suit a variety of options. If you have concerns about a down payment, rural housing loans can help you with zero-down, low closing costs and low mortgage insurance.
What Rural Loans does USDA Offer?
Currently, there are two kinds of USDA rural loans available for single family households:
USDA Guaranteed Rural Development Loans
USDA Guaranteed Loans are the most common type of USDA rural development loan and allow for higher income limits and 100% financing for home purchases. USDA Guaranteed Rural Home 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 Development 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 a zero down mortgage, as defined by the USDA. Click here to see area income limits for this program.
USDA Rural Loans versus Conventional Loans?
USDA Rural Loan Programs are credit-flexible
USDA mortgage loan requirements are not totally credit score driven, although it is required to have at least a 620 FICO score to obtain an approval through most lenders. USDA mortgage guidelines are written in a way that provides the borrower the benefit of the doubt that there had been, at some point in their past, circumstances beyond their control, and as long as the borrower has recovered from those circumstances in a reasonable manner, they’re generally going to be credit-eligible for an USDA rural loan mortgage.
Rural loans have low monthly mortgage insurance
A distinct advantage of a USDA rural development loan, as compared to a conforming loan, is great interest rates and low mortgage insurance (MI). The daily USDA rural home loan rates are usually comparable to a conforming 30-Year Fixed loan.
USDA Rural Housing Loans are zero down
RD Loans have no down payment requirement. Most other loan programs don’t allow this.
USDA Rural Loan Eligibility:
To be eligible for USDA rural home loan programs, 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). Applicants for loans may have an income of up to 115% of the median income for the area. Maximum USDA Guaranteed Loan 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.
What is the most that I can borrow?
The maximum amount for a rural loan is determined by:
Maximum loan: 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 loan guarantee fee).
What are the down payment and closing costs?
Are you curious what is the minimum down payment for an USDA Rural Loan? USDA Mortgage Loans require 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 Loans?
While USDA Mortgage Guidelines do require that the property be Owner Occupied (OO), they do allow you to purchase condos, planned unit developments, manufactured homes, and single family residences.
Can I get an USDA Rural Loan after bankruptcy?
Criteria for USDA loan approvals state that if you have been discharged from a Chapter 7 bankruptcy for three years or more, you are eligible to apply for USDA rural property loans. If you are in a Chapter 13 bankruptcy and have made all court approved payments on time and as agreed for at least one year, you are also eligible to make a USDA Loan application.
Learn more about Rural Loans.