USDA rural housing loans are geared toward home buyers who live in rural areas of the United States and who have little to no money to put down. USDA rural housing loan programs offer flexible, common sense underwriting guidelines, relaxed credit requirements, the ability to finance closing costs into the loan amount, lenient seller concessions, and rates that are comparable to, if not better than, conventional fixed rate mortgage programs.
USDA Rural Housing Loan Program Highlights
(subject to change):
- Loans may be for up to 102% of the appraised value or sales price (whichever is lower). A one time 2% guarantee fee can be included in the loan which is how the loan can go up to 102%. This feature allows buyers to finance this expense into the loan amount versus paying it out of pocket.
- Secure, fixed-rate 30 year mortgages (no 15 year program at the time this was page was researched)
- Sellers can assist with paying the buyer’s closing costs
- Little cash reserves needed for qualified borrowers
Partial List of Eligibility Guidelines for USDA Rural Housing Mortgages
- Income limits may apply. Qualifying income includes all income. According the USDA’s site, this includes “salary, tips, bonus, overtime, alimony, child support, etc… received by the applicant and co-applicant(s)”
- Home buyers must be United States’ citizens, qualified aliens, or legally admitted to the U.S. for permanent residence.
- Adjusted annual household income cannot exceed the moderate income limits for the area. A family’s size and child care considerations may increase chances for qualification if deductions are applicable.
- Primary residences only (second homes and investment properties are ineligible).
- Programs exist for single family homes and multiple family properties.
- Certain manufactured home may be eligible.
- Home must be located in rural areas. Although you might be surprised to how many area qualify that don’t seem all that rural.
- No limited to first time home buyers.
- Upfront mortgage insurance may be financed into the loan amount.
- There is no minimum credit score requirement but a letter of explanation may be required if score is below a certain threshold.
You may check the USDA web site – http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do – to confirm the property eligibility and income limits for the subject property and area (you will see those links on the left navigation). In today’s shrinking credit market, USDA rural housing loan programs are one of the only 100% mortgage financing options in the marketplace.
Please note that the mortgage companies in the rate tables on ForTheBestRate.com to not post mortgage rates for USDA mortgages. The company that compiles the data and supplies the rate feed does not currently collect USDA pricing (likely due to the number of adjustments involved). This does not mean that many of the companies in the rate table do not offer USDA financing. You’ll just need to call them or visit their sites to see if they are current offer USDA of other low or no money down programs such as FHA loans or VA mortgages.