The USDA Guaranteed Housing Loan Program Explained

For people living in the rural areas, owning a property can be costly. With a USDA home loan, low and moderate income earners can have an opportunity to live in their own home. The aim of the loan program is to provide those living in the rural areas to buy a home through financing. Residents in rural areas can avail of a USDA guaranteed loan as long as they meet the requirements. The US Department of Agriculture defines a rural area as one with a population less than 10,000.

Eligibility Requirements For USDA Loan

USDA loans are governed by Section 502 of the USDA Rural Development Mortgage Program..  The following are the primary requirements for securing a USDA guaranteed loan:

• Property must be located in a qualified rural area. To see if your property is eligible for USDA loans, check out the USDA loan map.
• The residential home must be single family property. Multi-family residential properties with 2 to 4 units are disqualified.
• The financing can be used for several purposes. Section 502 of the program states that the money can be used for building, repairing, renovation, or relocation of a qualified single-family property. The financing can be used for purchase and preparation of the home. The financing can be used for water and sewage.
• 90% of the loan amount is specifically guaranteed against any losses. Lenders are guaranteed against any losses they may incur when the borrower defaults on loan repayments.
• Property Eligibility For The Loan

The following are the requirements that need to be satisfied for your home to be eligible for the program:

• Your property should be located in a USDA designated rural area. Check the website of the USDA if your house is located in a qualified rural area.
• It must be modest in size, design, and cost. Whether being purchased or renovated, the property should meet or exceed local and state building code requirements. It should also meet the minimum thermal and site standards of the Housing and Community Facilities Program guidelines.
• Manufactured properties must be permanently affixed to their foundation and should pass the HCFP and HUD standards for manufactured homes. Currently manufactured homes are not qualified for guaranteed financing unless it already has received one.

Loan Terms and Conditions

• A guaranteed loan from the USDA has a fixed 30-year term. It is the lender who will determine the interest rates. The funding will depend on the program guidelines and requirements of the agency underwriting the loan.
• Lenders must carefully evaluate the income of the borrower and then factor in the monthly payments according to the new amount, taxes, insurance, and other existing debts.
• The maximum loanable amount is up to 100% of the appraised value making the USDA guaranteed loans as the only authentic no down payment, 100% residential loan program available for rural lenders.