What are USDA Rural Housing Loans?
Backed by the US Department of Agriculture, USDA Rural Housing Loans are available to borrowers in rural parts of the country. This program was established with the intention of promoting home ownership and community growth in under-developed areas, and as a result, offers many desirable terms for home buyers. For example, this is one of the few remaining programs offering a ‘no money down’ mortgage option.
Benefits of USDA Rural Housing Loans
- Low down payment requirement, up to 100% financing available.
- Low mortgage rates.
- Can be easier to qualify for compared to other programs.
- Seller may contribute to closing costs.
- No monthly mortgage insurance required.
Available USDA Loan Programs
- Purchase Loans – Buy a home with little to no out-of-pocket expenses. USDA loans allow for 100% financing for qualified borrowers and seller-paid closing costs up to a certain percent of the loan amount
- Refinance – USDA offers a rate and term refinance option. If you are moving from one USDA mortgage into another you may qualify for a Streamline Refinance that has reduced fees and a more simplified process
How Do I Qualify for a USDA Rural Housing Loan?Qualification requirements will vary depending on which type of fixed rate mortgage you apply for, but will be based on several factors including:
- The property must be located in an eligible rural development area*
- Must meet income requirements for the loan amount you plan to borrow**
- Home must be used as your primary residence
- Credit history and score
- The amount of your other debts
- How much equity you will have in the property
*Keep in mind that some places that the USDA designates as “rural” are not as remote as you might imagine. Many metropolitan areas have eligible properties nearby. The Property Eligibility Map can be found on the USDA Rural Development website.
**Another unique qualification is that you must have both enough income to be able to afford the home, and also fall below specified income limits.
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