The following general guidelines were provided by USDA Rural Development and are not meant to give the entire USDA loan guideline package – just the highlights of what it takes to qualify for a USDA loan.
The USDA rural housing loan is a great choice because it has zero down payment and requires no mortgage insurance. What many don’t realize is that there are two types of USDA housing loans: the Guaranteed USDA Rural Home Loan and the USDA Direct Home Loan.
With both these loans, funds can be used to build, repair, renovate or relocate a home or to purchase a site and prepare it for building, including water and sewage. In addition, housing purchased must be modest in size and price. It should not have market value in excess of the area in which it is located. It must meet building codes and site standards.
Guaranteed USDA Rural Home Loan
- The Guaranteed USDA Rural Home Loan is funded by one of many lenders across the country. Because it is guaranteed by the U.S. government (the USDA covers the loan in case of borrower default), credit and eligibility guidelines are more lenient than they would be in a conventional loan.
- The Guaranteed USDA Rural Home Loan has a higher income limit than the USDA Direct Home Loan. You can have a qualifying income of up to 115% of the area median household income.
- Guaranteed USDA Rural Home Loans are based on 30 year fixed rate loans.
- You should have a reasonable credit history.
USDA Direct Loan
- The USDA Direct Loan is funded directly by the government.
- It differs from the Guaranteed USDA Rural Home Loan in that it has stricter income limits. Your income must not be more than 80% of the area median household income to qualify.
- You must be without adequate housing; for example, if your family consists of five people living in a two bedroom apartment your housing is inadequate.
- The loan term is up to 33 years but can be extended to 38 years for those with very low income, and may have a lower interest rate than a conventional home loan.
- You must be able to meet the loan housing payment including taxes and insurance.
- Your housing payment can be up to 26% of your monthly income.
If your family is low income and you think the USDA Direct Loan or the Guaranteed USDA Rural Home Loan may be able to help you, it might be to your advantage to apply today for a free quote.
