The United States Department of Agriculture provides special loans, known as USDA rural home loans, for those who live or want to live in eligible rural and suburban locations. In 2014, as a part of its Rural Development program, the USDA invested nearly $20 billion to help thousands of families buy and improve their homes. This program is designed to enhance the quality of life for Americans in rural and suburban areas. It offers no-down-payment, low-interest rate mortgage options, readily available to eligible areas.
How & When are They Helpful?
There are three types of USDA home loan programs: loan guarantees, direct loans, and home improvement loans or grants. The USDA guarantees mortgages issued by a participating local lender — similar to the VA loans — allowing eligible buyers to get low mortgage interest rates without a down payment. However, you will need to pay a mortgage insurance premium if you do not put money down.
Direct loans issued by the USDA are for low and very, very low-income applicants. These income thresholds vary by regions, but interest rates may be as low as 1%. Home improvement loans or grants allow homeowners to repair or upgrade their rural home. These loans or grants can provide nearly $30,000 in assistance to eligible borrowers. Income limits vary by region and household size, so you should consult the USDA map to figure out your local limit. To be eligible for a USDA Rural loan, you must prove your U.S. citizenship, dependable income (typically for a minimum of two years) and acceptable credit history. Most lenders want borrowers with a credit score of 620 or higher, but those with lower scores can still be eligible by meeting stricter underwriter requirements.
Who are They For?
Rural loans all center around being in an eligible area. That being said, along with the varying types of rural loans, there are a few situations in which you can qualify for a USDA Rural loan. If you are repairing or renovating an existing home in the eligible area, you can get up to $30,000 in assistance. Don’t worry if your income is low, as these types of loans are meant for low-income borrowers. And, while lenders will look at your income and credit history, the application is very lenient when it comes to credit. The better credit you have (the sweet spot is 620 and higher), the less strict your underwriting will be. If you’re unsure if you live in an eligible area, the USDA has a map with the areas on them.
USDA Rural loans are perfect for homeowners or buyers in many ways. The trick is knowing if your current or future home is in the eligible area. Luckily you have us. We will answer all your questions and make sure you have everything you need to get approved. Just contact one of our home loan experts today!