The U.S. Department of Agriculture (USDA) offers home loan programs to those who live in rural areas and have limited incomes. Do you qualify for these programs?
Three Types of USDA Home Loan
The USDA offers three home loan programs, which are:
- Direct Loans – The USDA directly administers these loans for borrowers who have low or extremely low income. Note that income requirements differ from one region to another. Due to subsidies, borrowers can expect reduced interest rates as low as 1%.
- Loan Guarantees – Similar to VA and FHA backed mortgages, these are funded by the USDA and administered by a participating lender. They allow you to obtain a reduced interest rate even with no down payment. However, you may be required to have mortgage insurance.
- Grants and Loans for Home Improvements – If you qualify for these, you can use the funds for upgrading or making repairs on your home. These can combine both a grant and loan to provide you as much as $27,500.
How USDA Home Loans Work
Utah Loan Pros says qualification for USDA loans depends on your current living conditions. To be eligible, you must show that you:
- Don’t have a safe, decent, and sanitary home
- Can’t get a loan from traditional loan programs
- Have a net income at the limit of low income standards specific to the area where you reside.
In general, the USDA offers direct loans for houses that are 1,800 square feet or smaller with market values less than the loan limit of the specific area. While limits depend on the state you’re in, normal loan limits are around $216,800 all over the country.
In expensive real estate areas such as Hawaii or California, you may get mortgage over $500,000. In rural states, mortgages can be as low as $100,000.
Check with your lender or the USDA for more specific details, but keep in mind that the number one factor is your income and your location.