USDA Home Loans
Because many rural communities across America are struggling during these hard economic times, the government, through the United States Department of Agriculture (USDA), has created an excellent home loan guarantee program for individuals and families who live in rural areas. This USDA home loan program allows for families to borrow up to 100% of the home value, including closing costs. The USDA home loan program is credit flexible, has no mortgage insurance, and is the only home loan program available to the general public that requires absolutely no down payment.
The USDA Home loan program allows for two different types of home loans that are dependent on your annual household income. These are known as Guaranteed Housing loans and Direct Housing loans. Because USDA loans are specifically designed to help moderate to low income families secure a home loan in a rural area, there are various income limits that vary from county to county.
USDA Guaranteed Housing Loans
USDA Guaranteed housing loans are designed for families with moderate to low incomes. To be eligible for a Guaranteed housing loan, applicants may have an income of up to 115% of the median income for the area. If their annual household income exceeds 115% of the median income they will be deemed ineligible for the program. Also, families must currently be without adequate housing, must be able to afford monthly mortgage payments, including taxes and insurance, and have an average credit history of 580 or above. They must also be a U.S. citizen, qualified alien, or be legally admitted to the United States for permanent residence.
USDA Rural Direct Housing Loans
USDA Rural Direct Housing Loans are similar to USDA Guaranteed housing loans but are only available for low to very low income households. Low income is defined by the USDA as being between 50 and 80% of the average median income, while very low income levels are defined as being below 50% of the average median income for that area. If your income exceeds these income limits you will not be qualified for the rural direct housing loan program. Besides income limits, the USDA rural direct housing loans carry the same qualifications as the Guaranteed housing loan requirements. However, rural direct housing loans offer a longer period of which to repay your loan, ranging from 33-38 years, which results in overall lower monthly mortgage payments.