Benefits of a USDA Rural Development Mortgage

Are you looking to purchase a home in a rural community, but wondering where to begin looking for help with a home mortgage? Good news! The U.S. Dept. of Agriculture (USDA) has developed a home loan guaranty program that can help you find a lender and obtain a home loan mortgage. The USDA Rural Development program offers partnered lenders a guaranty on loans provided to qualified borrowers for housing in rural communities. With the help of this program, you can be living in a home with little or no money down!

A USDA Rural Development home loan offers qualified borrowers a chance to obtain a home loan with easier qualifications and financing options than other conventional loans. Keep in mind that the USDA Rural Development does not fund the mortgage loans. Rather, the program has partnered with selected lenders in all states who will loan the money with a repayment guaranty from the USDA, if ever the loan should default. This offers lenders confidence in providing loans to qualified candidates who meet the USDA Rural Development underwriting guidelines.

Quick look at USDA loan benefits

  • No Down Payment Required. Borrowers who qualify for a USDA Rural Development home loan have the flexibility to pay nothing out of pocket for a down payment. That means a borrower can finance up to 100% of the appraised home value. Or, a borrower can have a gift or grant go toward a down payment with no money out of pocket.
  • No mortgage insurance payments. Unlike an FHA guaranteed home mortgage, a USDA Rural Development home loan does not require expensive mortgage insurance premiums to be paid by the borrower. That means more money can go toward the mortgage payment each month.
  • Competitive 30 year fixed interest rates. With the guaranty of the U.S. government, a lender can offer the lowest interest rates to qualified individuals and families.
  • Flexible credit guidelines. Borrowers must still provide a credit history report. But the flexible guidelines allow potential homeowners with spotty or bad credit to still qualify for a home loan.
  • No maximum purchase limit. The USDA Rural Development program has no maximum purchase price limit. However, a lender will still determine the maximum amount of loan each applicant is eligible for based on ability to repay.
  • Home repairs can be included in loan. Looking to purchase a "handyman special" home? Homes that need refurbishing or rehabilitation may qualify for extra funds to be included in the home loan mortgage to go toward repair costs.

Who is eligible?

USDA Farm

Any individual or family who plans to occupy a home located in an eligible rural area as their primary residence may qualify for a USDA Rural Development home loan. An applicant for the USDA mortgage guaranty loan must provide sufficient income verification and a credit history that indicates an ability and willingness to meet repayment obligations. An individual or family must show proper legal capacity to own property in the U.S.A., own no home or dwelling currently, and have insufficient resources to qualify for a conventional home mortgage.

How to get started

Interested future homeowners should contact a local Rural Development Office and obtain an Approved Lender List. Find out if a home or property is included in the Rural Development designated rural area. Generally, rural properties that are located in open country and in towns with a population less than 10,000 are a designated rural area.

With a lender is secured and a qualified rural home is found, an individual or family can begin the application process and soon find themselves in a rural home oasis!

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