The USDA home loan program is one of the best mortgage programs available. Also known as rural development loans, you do not actually need to buy a home in a rural area to qualify.
USDA home loans are government-backed loans that allow you to buy a home with no money down. Home buyers can even finance closing costs into the loan or get seller assistance, potentially enjoying a no money down mortgage with 100% financing.
The USDA program has been around since 1991. It was designed to boost homeownership rates in rural areas, but it is not just rural areas that are covered by this flexible loan program.
The USDA rural home loan program offers several advantages:
Despite these benefits, there are some drawbacks to keep in mind. The USDA rural mortgage program has strict income requirements based on median income in the area. If your income is even a bit too high, you will not qualify. You must also buy a home in a HUD-designated rural area which may be rural, the suburbs, or an area in need of revitalization.
There are two types of USDA loans to choose from – direct loan and guaranteed loan. A USDA direct loan is made by the USDA to low income borrowers with a household income below 80% of the median income in their county. A USDA guaranteed loan is made by the bank. USDA guaranteed loans are easier to qualify in terms of income standards.
You will need to meet these requirements to be eligible for a rural housing loan: