USDA Rural Development Home Loan - What is It?

When the subject of financing a home comes up in a conversation with a friend, real estate agent or even a mortgage loan professional, the phrase USDA Rural Development usually does not come up. And when it does, the typical response has been; "we aren't looking for a farm".

The last thing you would think of would be about a mortgage. After all the USDA grades beef, eggs and pork; but mortgages?

The USDA Rural Development Home Loan is a mortgage that is Guaranteed by the United States Department of Agriculture and helps families buy homes in areas designated as rural by the USDA. Its purpose is to help low to moderate income families buy a home without the burden of a large down payment and without the added expense of a costly monthly mortgage insurance payment.

Here is a short overview of purpose for the USDA Rural Development Home Loan:

1. To encourage growth of rurally designated areas. Note that many areas with the rural designation look and feel like suburbs. Arizona has 15 counties and 7 of them are 100% eligible. Eligible areas are determined by population and distance to urban areas.

2. To allow low to moderate income families to buy a home with no down payment. USDA will finance up to 102% of the appraised value. It allows the buyers to roll in closing costs as well and in most cases the buyers can get their earnest money deposit back at closing.

3. To provide a home loan with the lowest possible monthly mortgage payment. The USDA Rural Development Home Loan does not have a monthly mortgage insurance payment which can save substantial money every month. For example; on a $200,000 FHA home loan, there would be a monthly mortgage insurance payment of just over $90. The same USDA Rural Development Home Loan would not have that added expense.

4. To allow buyers with a limited credit history to buy. This does not mean that a bad credit history is allowable, but does mean that no credit history or the use of an alternative credit history may be acceptable.


Source: http://ezinearticles.com/