USDA Loans
Urban living isn’t for everyone. You can make country roads your home with USDA loans. Because the USDA has a mandate to provide opportunities for affordable homeownership in rural areas, these loans are a good choice for new households, people with credit challenges, and first-time homebuyers (but that’s not a requirement).
Many small towns and suburban areas fall within the USDA eligibility areas, too, so it’s worth exploring a USDA rural development loan if you don’t want to be too far out in the country.
What is a USDA loan?
A USDA loan is a government-backed, no down payment home loan that allows low- to moderate-income households to get up to 100% financing for their primary residence. Whether you’re looking to buy, build, repair, or renovate, 91% of the United States is within the USDA mortgage boundary, so your opportunities are wide open!
How does a USDA rural development loan work?
Because the USDA rural housing loan program is designed to help people in eligible rural areas become homeowners, there are borrower participation requirements, including:
- Meeting income eligibility standards
- Occupying the home as your primary residence
- Being a U.S. Citizen, U.S. non-citizen national, or Qualified Alien
In addition, the property must be located in a USDA-defined eligible rural area and meet USDA eligibility requirements. You may be surprised to find out that there are small towns and even some areas close to cities that qualify.
History of USDA home loans
In the early 20th century, very few rural homes in the United States had indoor plumbing or electricity, and poverty was at an all-time high.
The Housing Act of 1949 declared that every American deserves a “decent home and a suitable living environment.” Housing in a post-World War II era was in short supply, and many cities had houses that were in rapidly deteriorating condition. To meet the goal of better and more abundant housing, the Housing Act set the framework for the creation of the USDA home loan program.
What are the benefits of USDA home loans?
A USDA rural home loan from CrossCountry Mortgage provides several benefits:
- You may qualify for up to 100% financing (the loan amount may not exceed 100% of the home’s appraised value)
- No down payment required
- A fixed-rate 30-year mortgage keeps your monthly principal and interest payments consistent throughout the loan term
- If mortgage rates drop, you can refinance with a USDA rural streamline refinance loan.
- Closing costs can be paid by the seller (up to 6% of the sale price) or included in the loan (if the appraised value is sufficient to provide the additional funds)
- The program is not limited to first-time homebuyers
- There is no maximum purchase price, though qualifying ratios and income will determine eligibility
- Certain home repairs and improvements may be included in the loan
- You can finance any of the following:
- Existing home
- New construction
- Modular home
- Planned unit development (PUD)
- Eligible condominium
- New manufactured home
Eligibility requirements
To qualify for a USDA rural home loan, you must meet certain requirements, including:
- Income of all adult household members cannot exceed 115% of the median income for the area where you are buying
- Current housing is not adequate or no longer meets your needs, and you can afford the mortgage payments, including insurance and taxes
- Cannot obtain a conventional loan
- Credit history demonstrates willingness to repay the loan and there are no current delinquencies on non-tax Federal Debt
