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Rural Development Loans

The mortgage professionals at Team Mortgage Company can walk you through the sometimes confusing process involved with securing a rural development loan. USDA rural development loans provide low-cost insured home mortgage loans that offer a variety of options. A USDA mortgage loan might be right for you if you want to purchase a home with no down payment.

Our Grand Rapids rural development loan experts can walk you through your options and help you to determine whether you qualify for this specialized loan. If you are unsure about your credit rating, or have concerns about a down payment, USDA rural development loans can give you piece of mind with their low closing costs and flexible payment options.

Currently, there are two rural development loans available:

  • USDA Guaranteed Rural Housing Loans
    USDA Guaranteed Loans are the most common type of USDA rural development loan and allow for higher income limits and 100% financing for home purchases. USDA Guaranteed Loan applicants may have an income of up to 115% of the median household income for the area. Area income limits for this program can be viewed here. All USDA Guaranteed Loans carry 30 year terms and are set at a fixed rate.
  • USDA Direct Rural Housing Loans
    USDA Direct Housing Loans are less common than USDA Guaranteed Loans and are only available for low and very low income households to obtain home ownership, as defined by the USDA. Very low income is defined as below 50 percent of the area median income (AMI); low income is between 50 and 80 percent of AMI; moderate income is 80 to 100 percent of AMI. Click here to see area income limits for this program.

The mortgage professionals at Team Mortgage Company will guide you through the rural development loan process to determine whether you would benefit from a USDA Rural Development Mortgage.

USDA rural development loans offer many benefits and protections not found with other loans. While these loans are not credit score driven, it is required to have at least a 620 FICO score to obtain an approval through most lenders.

USDA mortgage guidelines are written in a way that provides the borrower the benefit of the doubt that there had been, at some point in their past, circumstances beyond their control, and as long as the borrower has recovered from those circumstances in a reasonable manner, they’re generally going to be credit-eligible for an USDA rural loan mortgage.

A distinct advantage of a USDA Rural Development Loan, as compared to a conforming loan, is great interest rates and low mortgage insurance. The daily USDA mortgage rates are usually comparable to a conforming 30-Year fixed loan.

RD loans require NO down payment. Other loan programs don’t allow this. To be eligible for an USDA Rural Development Loan, your monthly housing costs (mortgage principal and interest, property taxes and insurance) must meet a specified percentage of your gross monthly income (29% ratio).

Your credit background will be fairly considered. At least a 620 FICO credit score is required to obtain an USDA approval through most lenders. You must also have enough income to pay your housing costs plus all additional monthly debt (41% ratio). These ratios can be exceeded somewhat with compensating factors.

Applicants for loans may have an income of up to 115% of the median income for the area. Maximum USDA Guaranteed Loan income limits for your area can be found here. Maximum USDA Direct Loan income limits for your area can be found here. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance.

The maximum amount for a USDA home loan is determined by:

  • Maximum Loan Amount: The is no set maximum loan amount allowed for an USDA Residential Loan. Instead, your debt-to-income ratios will dictate how much home your can afford (29/41 ratios). Additionally, your total household monthly income must be within USDA allowed maximum income limits for your area. Maximum USDA Guaranteed Loan income limits for your area can be found at here.
  • Maximum financing: The maximum USDA Rural Loan amount will be 102% of the appraised value of the home (100% plus the 2% USDA rural development loan guarantee fee).

Are you curious about the minimum down payment for an USDA Rural Loan? USDA Mortgage Loans require no down payment and they allow for the closing costs to be included in the loan amount (appraisal permitting).While USDA mortgage guidelines require that the property be Owner Occupied (OO), they do allow you to purchase condos, planned unit developments, manufactured homes and single family residences.

USDA Loan Requirements
To decide if you qualify for an USDA Mortgage Loan, the following will be looked at:

  • Your income and your monthly expenses. Standard debt-to-income ratios are 29/41 for USDA Loans. These ratios may be exceeded with compensation factors.
  • Your credit history (this is important, but USDA’s credit standards are flexible). A FICO score of 620 or above is required for all loans through most lenders.
  • Your overall pattern rather than to individual problems you may have had.

To be eligible for a rural development loan, your monthly housing costs (mortgage principal and interest, property taxes and insurance) must meet a specified percentage of your gross monthly income (29% ratio). Your credit background will be fairly considered. At least a 620 FICO credit score is required to obtain an USDA approval through most lenders.

You must also have enough income to pay your housing costs plus all additional monthly debt (41% ratio). These percentages may be exceeded with compensating factors. Applicants for loans may have an income of up to 115% of the median income for the area. Maximum USDA Loan income limits for your area can be found here. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance.

All rural development loans are fixed-rate mortgages. In a fixed rate mortgage, your interest rate stays the same during the whole loan period, normally 30 years. The advantage of a fixed-rate mortgage is that you always know exactly how much your monthly payment will be, and you can plan for it.

Rural areas include open country and places with population of 10,000 or less and—under certain conditions—towns and cities. An automated rural area eligibility calculator cab be found here: http://eligibility.sc.egov.usda.gov.