Many properties can be classified as rural housing and accepted under the USDA Rural Housing Loan Program. This program guarantees rural housing loans for lower to median income applicants for the purchase of owner-occupied single-family homes and gives buyers the opportunity to buy a home in the country or the outskirts of a town
Loans are offered in two separate categories. Rural housing direct loans are funded by the government for very low-income families, and applicants may obtain 100 percent financing to purchase a home or purchase a site and build one. Rural housing guaranteed loans can be used to build, repair, renovate or relocate a home. Applicants with income up to 115 percent of the median income for the area are eligible, but credit requirements are more stringent
The USDA Rural Housing Loan Program offers several benefits.
1. No down payment is required.
Down payments represent the most immediate expense and hurdle to purchasing a home. Avoiding this requirement can make a major difference in the type of dwelling a family can afford.
2. Closing costs can be financed into the loan.
Closing costs are another upfront expense in home purchases, and the ability to finance them means the expense can be lessened according to ability to pay. If the appraised value of the property is higher than the purchase price, the USDA allows some of the closing costs to be financed.
3. You avoid paying a monthly mortgage insurance premium.
The monthly expense of a mortgage insurance premium can become a burden for many homeowners. USDA Rural Housing saves the buyer from that expense.
4. The obligation to maintain assets in reserve after the closing is waived.
While it’s always good to maintain some financial flexibility, today’s homebuyer is often pressed to make ends meet. The need to tie up some of your assets is avoided in rural housing loans.
5. The seller can contribute to cover closing costs, pre-paid taxes and insurance.
The seller is allowed to contributed six percent of the purchase price to cover closing costs, pre-paid taxes and insurance. A savvy buyer can negotiate to ensure some of these expenses are covered.
6. Borrowers with lower credit scores can be approved.
Currently, borrowers with a minimum credit score of 620 can be accepted.
7. Loan terms omit a pre-payment penalty.
Just another potential expense avoided under the USDA Rural Housing Loan Program!
8. Loans are amortized over 30 years.
The ability to spread costs over time is key to any successful mortgage application and payment. By allowing the maximum of 30 years, the USDA Program gives the buyer the maximum amount of time possible to repay the loan.
The USDA provides an interactive web site at:
http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
to help you determine your eligibility for its Rural Housing Loan Program. The first step involves determining whether the dwelling is located in an acceptable area. The second evaluates your income eligibility. For more information, you can also contact the USDA directly at a variety of phone numbers organized by program type and state on the web site.
