For one reason or the other, most real estate agents and even mortgage loan professionals, fail to mention USDA Rural Development home loan when the subject of home financing is being discussed. Even when the discussion touches on USDA rural development home loan, most people often misconstrue it for farms or agriculture. However, when one looks at the United States Department of Agriculture’s definition of ‘rural’, some areas within the urban community are also classified as rural.
For those not familiar with the USDA home loan, it is mortgage loan that is guaranteed by the United States Department of Agriculture aka USDA. The loan program is designed to help individuals and families to buy homes within areas that have been classified by the USDA as rural. The primary aim of the loan is to help families with low- to moderate-income to afford a home without the stress and burden associated with conventional mortgages. The USDA rural development home loan do not need a large down payment, or costly monthly mortgage insurance payment.
The USDA guaranteed home loan program comes with different features and benefits that make it particularly easy for families with low incomes to own their homes. A short overview of the USDA rural development home loan and the purpose is provided below.
- To encourage the growth of rural areas – It is worth noting that many areas that fall within the category of “rural” areas according to the USDA actually feel like suburbs. For instance, the state of Arizona has 15 countries, with 7 of them being 100 percent eligible. The eligibility of an area depends on the population of the area and its distance to urban areas.
- To enable low- to moderate-income families buy a home with no down payment – The United States Department of Agriculture finances 100 percent of the value of the home. The loan program allows buyers to purchase a house with no money down. The seller can pay for the borrower’s closing costs and prepaid items; hence, the borrower can get into a home with absolutely nothing out of their pocket.
- To provide families with a home loan – that has the lowest possible mortgage payment. The United States Department of Agriculture home loan has no monthly mortgage insurance payment, allowing borrowers to save substantial money every month. The loan program does not also have additional expenses like conventional mortgage loans.
- To allow intending homebuyers with marginal credit history to own homes – However, it is worth noting that a bad credit history might not be allowable. It only means that persons with decent credit history or persons that want to use an alternative credit history will have a chance to own a home.
Benefits of USDA Rural Development Home Loan
It is the American dream for everyone to own a home. However, as dreams don’t always come true, not every American can live the idea of owning a home. This is so as jobs are not mainly paying enough for an average household to own a home, especially in more populated areas.
This makes it more difficult to get credit, especially with rural lending institutions having large down payments as part of their requirements. Interest rates and cost of construction in rural areas are also higher than what is obtainable in urban cities. This is why programs like the U.S. Department of Agriculture (USDA) Rural Development home loan programs are particularly beneficial to rural dwellers.
The U.S. Department of Agriculture (USDA) Rural Development home loan is guaranteed by the federal government and is designed to ensure rural dwellers can own modest, yet affordable, homes. The mortgage is designed for people with decent but stable income. Another factor that ensures eligibility is a history of timely debt payment. The income requirement for borrowers is calculated based on the rules set by the U.S. Department of Agriculture.
Both new and existing homes are eligible for the program. However, it is required that the houses be located inside the USDA eligible area map.