USDA Loans
About our USDA Loans
This product offers 100% financing for qualified buyers as long as they fit into a geographic and income bracket In order to be eligible for many USDA (United States Department of Agriculture) loans, household income must meet certain guidelines. Also, the home to be purchased must be located in an eligible rural area as defined by USDA
What Exactly Is a USDA Loan?
USDA stands for the United States Department of Agriculture and focuses on the responsible development and use of rural and agriculturally rich areas. Depending on the state and location, this can range anywhere from low population suburbs to quiet property miles away from your closest neighbor.
The USDA loan, or Rural Development Loan, is an alternative mortgage option for homeowners to start building or residing in sparsely populated areas. These loans offer low, fixed-interest terms as well as no down payment and closing costs built into the amount of the loan. This can help moderate income families comfortably afford a home that helps to generate more cultural and societal impacts on these low population areas.
Rural Development Loan Eligibility
The USDA does have requirements that must be met in order to be eligible to apply. Below is a brief list of some of the requirements from the USDA’s direct loan requirement page not mentioned above:
- Have no access to safe and decent housing
- Inability to receive a loan from a fair lender
Property requirements include:
- Being 2,000 square feet or less
- Market value being at or below fair value for the area
- No in-ground pools
- No commercial or business activity to be performed on the property.
What these requirements help to accomplish to fair opportunities to those who truly need it while keeping out those who only wish to profit from the generous programs. Doing so can get you banned from applying to these federal aid programs, something that you may need later on in life as many senior citizens become eligible for grants for home repairs and maintenance.
Those same grants can also be offered as loans for younger families that may already own a home but are unable to afford required updates or maintenance to keep it safe and habitable. These are typically focused more on low-income families, but always good to keep in mind as it can be paired with a Rural Development Loan to keep your dream home in top shape.
How Repayment Works
USDA loans operate as any other loan with the total loan amount, plus interest, being paid back over the life of the loan through regular monthly payments. One detail to be aware of is that unlike a standard mortgage that you can keep and still move, often renting out the home, the Rural Development Loan requires the homeowner to pay off the remaining amount in the event they choose to no longer occupy the property.
The amount of your payments will depend on the total borrowed, with the USDA offering an online self-assessment tool to help determine how much you can borrow for a rural home purchase. This can be helpful as you try to find the balance between getting the perfect home and being kind to your budget.
The interest you will have to pay is based on current market rates at approval or closing, using the lower of the two instances. If you qualify for other payment assistance, this interest rate can start dropping to as little as 1%. On top of these attractively low fixed-interest rates, you’ll have the option of up to a 33 year loan or 38 if you qualify for the loan but would struggle to make the higher payments of a shorter loan.
In the end, a Rural Development Loan insured by the USDA is an excellent option for those looking to get away from the city or want to help renovate and improve home in their rural communities.
