USDA Rural Home Loan
The USDA Rural Home Loan program is another Federally Insured mortgage program aimed at helping homeowners buy a home. The twist with this program, though, is that it is limited to only certain geographical areas it deems as “rural.” Typically this means the home must be located outside of any major urban or suburban areas, but that does not mean it has to be a farm or on a large piece of land. The best way to see if you are in an eligible area is to check on the USDA site and type your address in the search bar.
There are two types of USDA Rural Development Home Loans: Direct, and Guaranteed. A Direct loan is actually funded by the USDA. This is typically the most desired type of USDA loan due to differences in underwriting, and sometimes also in fees. A Guaranteed USDA loan is a loan generated through a typical (but approved) lender that is simply guaranteed by the USDA. This is basically a vote of confidence from the USDA which makes the lender more secure in funding the loan.
USDA Rural home loans do offer some advantages:
- Lower Private Mortgage Insurance (PMI) than other options, including FHA
- No down payment required!
- You can finance the closing costs into the loan – This is assuming your appraisal value leaves enough room to cover the costs.
- Same competitive interest rates that everyone else can offer, and sometimes better.
- Flexible underwriting. This can enable some people who may not get approved for a conventional loan (due to credit, lack of reserves, higher DTI, etc) to possibly still get into a home. Granted, there are still underwriting guidelines that must be met.
If you are looking to purchase a home with little to nothing down, and also want to have a lower PMI payment, a USDA Rural Home Loan could be the ticket. The biggest consideration with this loan program is geography. If you want to buy a home in the heart of a major town, then this won’t work for you. But if you’re willing to go a little outside the main areas, then this might be a good option!
If you would like to talk with someone about your home loan options, and to see if a USDA Rural Development Home Loan is the right fit for you, feel free to fill out our application, beginning with the short form to the right. Then we’ll get you in touch with someone who can talk you through it all!