What do you think of when you hear "USDA Rural Development?" Do you picture a big red barn and a long white fence with horses and lots of acres at hand? It's the wrong picture. In fact, USDA rural development is not for farmers. It's not a mortgage loan option for buying a farm. Let's look at what this loan program is for in today's housing market.
Below is an excerpt from "The Only Mortgage Loan Options Guide You Need."
This mortgage loan option is one of those hidden gems no one seems to know about. AmeriFirst Home Mortgage is helping to change that. For buyers looking to buy a home with no down payment and are open to suggestion on the geographic location of the home, the Rural Development Mortgage from the United States Department of Agriculture (USDA) is a great option.
Under the Guaranteed Loan program, Rural Development (RD) guarantees loans made by private sector lenders like AmeriFirst. A loan guaranteed through RD means that, should the individual borrower default on the loan, RD will pay the private financier for the loan. The buyer works with the private lender and makes his or her payments to that lender.
Under the terms of the program, an individual or family may borrow up to 102% of the appraised value of the home, which eliminates the need for a down payment. The home must meet location requirements set up by the USDA. These are non-urban areas, but often include many villages and small towns near bigger cities.
The home must be owner-occupied and single family housing, but there are no lot size restrictions. The loan term is a 30-year fixed rate mortgage. Debt to income ratios for RD are: your house payment should be less than 29% of your income. Your total debt should not exceed 41% of your income, and it does allow for non-traditional credit. Another benefit to RD is that you have no limit on how much the seller can contribute to your closing costs, and gift money is allowed for covering those closing costs as well.
In our experience, USDA has become more focused on the difference between farms and rural properties. If the house you're looking at has a big red barn, then you'll probably have a problem getting financing through the USDA rural development mortgage option.
Here's a look at some quick facts about this home buying option.
- Moderate income (limits apply)
- Non-urban areas (may include villages)
- Must legally work in US & have SS#
- 2 years of employment history
- Owner occupied
- Single family housing only
- Modular homes
- New manufactured homes on foundation
- No lot size restrictions
- 100% + 3.5% guarantee fee
Down Payment or Cash Investment:
- None required
- New construction
- Refinance (only from current RD loan)
- Minor repairs
- 30 year fixed rate
- No pre-payment penalty
- Perfect credit not required
- Bankruptcy 3 years after Ch 7 & minimum credit score
- Non-traditional credit allowed
Closing Cost Sources:
- No limit on seller contribution
- Gift funds allowed to cover closing costs
Bonus information: If your home is under a rural development loan now, you may be eligible to refinance and get a lower rate.
Want to know more about the USDA rural development loan and other options available to you? Download "The Only Mortgage Loan Options Guide You Need" at the button below. Whether it's a low-down payment option or mortgage to buy a fixer-upper, you have quite a few options at your fingertips. Get your copy of this free guide below.