Rural

USDA Home Loans: The Complete Guide

The USDA Home Loan is a specialized mortgage financing option meant to assist rural and suburban homebuyers achieve the dream of homeownership.

The program – otherwise known as the USDA Rural Housing Guaranteed Loan, though most refer to it as the “USDA Loan”, “Rural Development Home Loan”, or “Section 502 Loan” – offers unique benefits that are not found in conventional mortgage options.

The main benefit of this unique mortgage option is the ability to finance 100 percent of the home without a down payment. Since the USDA Home Loan is insured by the U.S. Department of Agriculture, lenders are able to offer $0 money down, low interest rates and minimal mortgage insurance – compared to other programs.

USDA Home Loan Eligibility

USDA Loans are similar to the major mortgage products, offering a normal repayment schedule, standard closing costs and no prepayment penalties for those who want to pay off their loan prior to the 30-year term. Where USDA Home Loans differ from major mortgage options is in eligibility requirements.

The USDA has two major eligibility requirements for homebuyers: the home must be located in what the USDA considers a “rural” area, and the borrower’s household income must not exceed 115% of the area’s median.

Fortunately, what the USDA considers a rural area extends to many suburban homeowners, making millions of Americans eligible for this amazing mortgage option. And, as for the income requirements, this number fluctuates based on county, increasing the opportunity for those who live in higher cost counties to be eligible. For more information on USDA Loan eligibility, see here.

Other USDA Home Loan Considerations

  •  To be eligible for the program, homebuyers must meet the qualifying debt-to-income ratio of 29/41. What this means is that no more than 29 percent of your monthly income should be used on housing costs and no more than 41 percent of your monthly income should be used on combined debts, including housing. However ratios can be extended up to 34/47 with certain compensating factors. It is best to speak with a USDA specialist to see if you qualify.
  •  USDA Home Loans currently are only available with a 30-year fixed rate term. However, the USDA will be adding a 15-year fixed rate loan in the coming months.
  •  Those without sterling credit can still be eligible. Non-traditional credit histories may be accepted.
  •  The guarantee fee can be rolled into the entire loan amount, making the USDA Rural Development Home Loan a true $0 down home loan.
  •  USDA Loans are not limited to first-time homebuyers. Both repeat and USDA first-time homebuyers are eligible.
  •  Other limitations: A USDA home loan is not just for first-time homebuyers. There are no restrictions regarding previous ownership. Additionally, a USDA loan is not limited to low-income borrowers. Moderate-income borrowers may also qualify. Income limits vary by area.

Getting started is easy, and can be done in less than 2 minutes. Fill out this form to get started today! After filling out the form, a USDA Home Loan expert will contact you and help you determine if you are eligible for the program and get you on your way to becoming a homeowner!