If you're interested in becoming a homeowner and are willing to live outside of an urban area, you might be able to qualify for an affordable USDA rural housing loan. In order to be approved for this type of loan, the borrower must meet income-based eligibility requirements and the property must be located in an area that is eligible for rural development loan funds.
Qualifying for a Rural Housing Loan
In order to be eligible for a USDA loan, the borrower must meet specific income criteria. The loans are available only to those individuals who meet the criteria for low or very low income households based on family size and income expectations for the particular area in which he or she is seeking to purchase a home. You can use the online income eligibility calculator to determine whether or not you meet the income criteria to be considered for this type of home loan. Additionally, details about income criteria qualifications for various classifications can be found on the income loan limits page.
Income is not the only criteria. In order to qualify for a USDA loan, borrowers must not currently have adequate housing. Ability to repay the loan is also taken into consideration. Credit history will be considered, as well as current income. Borrowers are required to demonstrate adequate income to cover the monthly loan payments, as well as to be able to afford property taxes and sufficient insurance.
Qualified individuals can apply for direct or guaranteed loans under the USDA rural housing loan program. Direct loans are funded directly by the federal government, as opposed to guaranteed loans which are funded by lenders. Guaranteed USDA loans are funded by approved lenders and backed by a guarantee from the federal government. In order to be eligible for this type of loan, applicants may have an income of as much as 15 percent higher than the median income specific to the area where the property is located.
If you're looking for a home in the middle of a major metropolitan area, it is not going to be eligible for financing under the USDA program. The primary purpose of these types of loans is to boost rural development by encouraging those who want to become homeowners to purchase property in outlying areas. Additionally, funds are often available to encourage property ownership in areas that have been impacted by significant natural disasters in recent history. You can see a list of eligible disaster areas on the USDA Rural Development website. To determine if a property that you are interested in purchasing is located in an area that is eligible for rural development funding, begin your search by using the USDA Property Eligibility tool on the agency's website.
However, it's important to note that it is possible that some properties in outlying areas that are eligible for the program will not show up via the online tool. If you're looking at a property in what seems to be an outlying area, but does not show up as eligible when you use the website, verify your findings with a Realtor or approved USDA lender in your area. You may be pleasantly surprised to learn that the property does in fact qualify for the program.
Affordable Home Ownership with USDA Financing
With a USDA rural housing loan, a down payment is not required and loans are written for a 30-year repayment term. If you are eligible for a USDA home loan and want to buy a house in an area that is eligible for the program, you'll likely find that this mortgage program provides you with the most economical way to achieve the dream of home ownership.