USDA Guaranteed Rural Development Loan

USDA Guaranteed Rural Development loans are primarily used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.

Eligibility: Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must have reasonable credit histories.

Income:

• 29/41 repayment ratio guideline
• Must be less than Rural Development County Income Limit for moderate income families (based on number of members in household)
• Part-time employment acceptable, after 1 year of employment
• Bonus and overtime income with only 1 year history can be averaged

Assets:

• No post-closing reserves or minimum investment required
• Borrower's closing costs (including prepaids) may be contributed by the seller, or financed into the loan amount
• Gifts and/or grants are permitted from family, friends, or non-profit agencies
• Cash-on-hand is acceptable

Credit:

• No minimum credit score guidelines
• No more than one 30-day late in the past 12 months
• No major derogatories over the previous 36 months
• No-credit-history is acceptable as long as three alternative sources are documented

Terms: Loans are for 30 years. The promissory note interest rate is set by the lender.

There is no required down payment. The lender must also determine repayment feasibility, using ratios of repayment (gross) income to PITI and to total family debt.

Standards: Under the program, housing must be modest in size, design, and cost. Houses constructed, purchased, or rehabilitated must meet the voluntary national model building code adopted by the state and HCFP thermal and site standards. New Manufactured housing must be permanently installed and meet the HUD Manufactured Housing Construction and Safety Standards and HCFP thermal and site standards. Existing manufactured housing will not be guaranteed unless it is already financed with an HCFP direct or guaranteed loan or it is Real Estate Owned (REO) formerly secured by an HCFP direct or guaranteed loan.

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