What to Know: Rural Development Program
Does buying a home feel out of reach because you think you haven’t saved up a down payment? Take a look at the U.S. Department of Agriculture Rural Development Loan (RD loan or USDA loan), which may provide up to 100 percent financing for qualified households purchasing homes in eligible rural areas.
If you live in a designated rural area, you may qualify for a USDA Rural Development Loan. This program helps rural individuals, families, communities and businesses obtain the financial support they need to improve their quality of life and economies. If you would like to buy a home in an eligible rural area, the USDA currently offers two types of loans:
Direct Loans
- Low to very low-income homebuyers
- Offered directly by the USDA
- 33-year fixed interest rate (typical term)
- Applicant’s income must be below local low- or very low-income limits as determined by the USDA
- Payment assistance may be available
- Apply at your local USDA Rural Development office
Guaranteed Loans
- Moderate-income homebuyers
- Offered by lenders such as banks, and guaranteed by the USDA
- 30-year fixed interest rate
- Applicant’s income must be below local moderate-income limits determined by the USDA
- Apply with a local USDA-approved lender
If you need help, you can also get repair and refinance loans through the USDA rural development program. Repair loans are offered directly by the USDA, while a loan to refinance is offered by lenders such as banks.
Financing for Rural Development Loans
Rural development loans do not require a down payment and must not exceed the purchase price limit set by USDA. They do charge a funding fee that is financed into your loan along with a monthly guarantee fee. New construction is allowed, but limited to 90% loan-to-value and the home cannot ever have been occupied. The eligibility of the loan will depend on several factors including, but not limited to, your adjusted household income, debt ratio, credit score and the property. Other requirements for a guaranteed loan include:
- You must live in an eligible rural area. Generally, rural areas with a population of 35,000 or less are eligible.
- Meet income eligibility based on your area (cannot exceed 115% of median household income).
- Agree to personally occupy the dwelling as your primary residence.
- Be a U.S. Citizen, U.S. non-citizen national or Qualified Alien.
- Generally, you cannot own any other real estate.
Rural Development Interest Rates
If you are looking to buy or refinance, talk to a lender first to explore your eligibility, financing and down payment options. I am here to help, even if you are not an RCB Bank customer.
Sources
Are You Looking to Buy a Home or a Homeowner Needing Help (usda.gov)
Single Family Housing Guaranteed Loan Program | Rural Development (usda.gov)
Single Family Housing Direct Home Loans | Rural Development (usda.gov)
The loan you choose will depend on your financial situation, how much you have to put down and where you want to buy a home. It is always a good idea to talk with a lender before deciding what loans to choose. Lenders at RCB Bank are happy to help answer questions even if you are not a customer. Give us a call or visit our online Mortgage Center.
Opinions expressed above are the personal opinions of RCB Bank personnel and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call RCB Bank at 855-BANK-RCB. With approved credit. Some restrictions apply. RCB Bank is an Equal Housing Lender and member FDIC. RCB Bank NMLS #798151.
