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Assurance Financial Blog

Rural Development Loans: What is a USDA Loan?

usda loans

Prefer rural living over city-life? Every year the United States Department of Agriculture uses its Rural Development program to invest about $20 billion in helping families across the United States buy and improve their homes. The program was created to boost rural economies and improve quality of life.

Below we’ve mapped out an overview of the USDA Rural Development Guaranteed Housing Loan Program, explaining how it works and if you’re eligible for loans.  

 

HOW DOES THE USDA LOAN PROGRAM WORK?

These are the three USDA home loan programs:

Direct loans: These mortgages are designed to suit low to very-low income applicants. The income threshold varies by region, and with subsidies, interest rates can be as low as one percent.

Home improvement loans and grants: These packages can be loans or financial awards, and are issued to homeowners for repairs or home improvement purposes. Homeowners can receive a combination of a loan and a grant, totaling up to $27,000.

Loan guarantees: Homeowners can guarantee a mortgage issued by a local lender through the USDA home loan program. Loan guarantees offer low mortgage interest rates, in some cases, without a down payment.

 

HOW TO QUALIFY FOR A USDA MORTGAGE GURANTEE

Income limits to qualify vary by region and size of household. Consult the USDA map and table to find specific requirements for your location. The loan program only funds owner-occupied primary residences. You must be a U.S. citizen and have a dependable income to qualify.

Other qualifications include making a monthly payment that is 29 percent or less of your monthly income and a good credit history. Metropolitan areas are excluded from the program. However, some suburban areas may qualify.

 

WHO DOES USDA ISSUED LOANS BENEFIT?

The USDA issues mortgages to applicants who they deem high-need. These individuals are without safe and sanitary housing, fall below the low-income limit for their region and are unable to obtain a traditional home loan. In most cases, the USDA will issue direct loans for homes of 1,800 square feet or less, holding a market value below the area loan limit. Across the country, the loan limit is typically $216,840.

For more information about the USDA Home Loan Program contact one of our Home Loan Experts today.

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