Do you wish to own a home in the quieter and less populated areas of the United States?
Are you unable to obtain a home mortgage through conventional financing despite your steady flow of income?
Or, does your credit history keep you from applying for a traditional home loan?
If you answered yes to these three questions, the RD USDA housing program might be what you are looking for. Are you interested yet? Read on.
The USDA Guaranteed Rural Development Housing Program
Under the umbrella of its Rural Development program, the United States Department of Agriculture designed the Section 502 Guaranteed Housing loans to serve households with modest or low incomes and aid them in attaining decent and safe dwellings of their own. The credit may be utilized to purchase newly manufactured or existing homes in qualified rural communities around the country.
While the USDA Rural Development administers the programs, it does not directly issue these guaranteed loans. Authorized commercial lenders make out the loans to qualified borrowers. These mortgage companies receive a guarantee from the USDA, which substantially lessens the risk of offering loans to applicants with lower qualifying standards and little collateral.
To be eligible for the USDA Guaranteed Rural Development Housing, the applicant should:
- Have a dependable source of income
- Be employed in the same company for at least three years
- Earn no more than 115% of the area median income
- Present financial and credit documentation that proves their ability to repay the loan on time
- Be unable to obtain mortgage credit through conventional means
- Apply for a property in USDA-qualified communities and areas across the United States
RD-approved lenders make the loans, usually on a 30-year term with a fixed interest rate. The mortgage may be up for 100% financing. The borrower’s earnings determine the loan amount, which is not more than the allowed 29% of the gross monthly income. The borrower can also choose to roll the closing costs into the mortgage payments.
In addition, the borrower needs to cover other charges, which include:
- A one-time guarantee fee amounting up to 3.5% of the loan
- An annual fee, which is 0.5% of the remaining mortgage balance
While there are no restrictions concerning the property size or the home’s design, the house must conform to HUD structural and building standards. Moreover, it must adhere to the current IECC or the International Energy Conservation Code.
In terms of amenities, the loan does not allow luxury installations such as a swimming pool or a jacuzzi.
The home will be subjected to an appraisal and assessment, which verifies whether the property is worth its value and inspects any issues that need to be addressed before the loan is approved and closed.
How to get started?
If you think you meet the standards mentioned above, you might want to grab this opportunity for a zero-down payment loan. To start, you can contact your local RD office for a list of authorized mortgage companies, or you can search for them online yourself!