If you’re looking to buy in a rural area, you may qualify for a USDA loan, also called a Rural Development Loan. A USDA loan is a government-insured home loan that allows you to purchase a home with NO money down. USDA Home Loans offer 100% financing to qualified buyers and allow all closing costs to be either paid for by the seller or financed into the loan itself. USDA offers some of the lowest rates of any loan, and you will always have a fixed-interest rate.
- Up to 100% financing on 30-year fixed loan is possible
- No first-time home buyer restrictions
- Seller can contribute to closing costs on purchase
- Closing costs can be included on the loan in refinance
- You can use grants & gift funds in select locations
USDA loan eligibility is determined by four factors:
- Credit Worthiness: When an underwriter reviews your credit history on a USDA loan, the major thing they will be looking for is a history of paying your bills in a timely fashion. If you have had blemishes in the past they may be overlooked as long as you have reestablished your credit over the past 12 months. Generally, any open judgments or collections will need to be paid off before you close on your new home.
- USDA Loan Income Restrictions: You will need to be able to document your income on a USDA loan. USDA will generally want to see a two-year history of employment or consistent income. Exceptions to the two-year requirement can be made for applicants such as students. On a USDA loan, assets are not required for approval, but can help overcome any possible blemishes on credit.
- Where You Live: In order to qualify for a USDA loan your home must be located in a designated USDA rural area. You can check the USDA eligibility of your county here. It might surprise you just how many areas of the United States do qualify for these no money down home loans. The goal of the USDA loan program is to help our nation’s smaller, rural communities thrive by making land and property more affordable.
- Owning Additional Property: The USDA does not currently allow buyers to own another “adequate” property and buy another home by utilizing the USDA loan program. The USDA loan is designed for those buyers who do not qualify for other financing and do not have adequate housing. However, there are certain circumstances when the USDA will allow you to keep the other home. For example, the USDA does not view mobile (manufactured) homes as adequate property. Other circumstances include if you have to move or if your current home is not adequately large enough for the size of your family.