Rural Housing Loan
Rural housing loans (USDA loans) are backed by the United States Department of Agriculture. They enable homebuyers to purchase homes in less populated areas around the United States, in order to promote rural development. One-in-three Americans live in an area that qualifies for a USDA loan.
Benefits of USDA loans
Because the loan is backed by the United States Department of Agriculture, there are immense advantages of USDA loans that most people can’t get with any other type of loan. Here are some of the benefits of USDA loans:
• No down payment is required. This is usually the only way for most homebuyers to qualify for a home without a down payment, unless you served in the military or have another unique loan option.
• Allows borrowers to get an interest rate that is lower than the current market interest rate, sometimes regardless of their credit score.
• There are relaxed credit requirements, and homes can be purchased with even minimal credit history.
• The private mortgage insurance (PMI) rate is lower than all other loan programs, and usually stays around .5%. (All loans without at least a 20% down payment require PMI, regardless of what loan program it is.)
Who qualifies for a USDA loan?
There are unique requirements for USDA loans. While the credit requirements for a USDA loan are incredibly relaxed, compared to other loan programs, there are specific areas across the country that are USDA-eligible. If your home or the home you hope to buy lies outside of a USDA approved area, then you are not eligible for a USDA loan. Pretty much any rural area in the country is going to be USDA-eligible. However, there are surprisingly some cities that are also USDA-eligible, due to being classified as “rural in character.” While the credit requirements for USDA loans are very relaxed, there are other specific requirements for USDA loans:
• The home being purchased must be within a specific area that is zoned as USDA-eligible. (These areas make up pretty much any rural area in the country.)
• The borrower’s income must not exceed 115% of the area’s median income.
• The borrower must not exceed a 29-to-41 debt-to-income ratio.
Call our experts today to see if you qualify for a rural housing loan!
