The USDA Loan Program

The USDA Rural Development program supplies $16 billion in funding to Americans in rural areas. Because millions of people qualify for different types of USDA loans, more families are turning to USDA Loans as a lending solution.

Patriot Home Funding specializes in USDA Home Loans. Our specialists can help you determine if you are eligible and your qualification level.

Most people in rural areas qualify for USDA loan benefits, but people living on the outskirts of a city or in a medium sized town may also qualify.

USDA Loan Guidelines

Some of the eligibility standards that determine if you qualify for a USDA loan for your home include what county and zip code the home resides in, your current income and credit history, as well as the number of dependents you can claim. Because these guidelines are very specific, it is important to work with a company that has experience dealing with USDA government financing. There are few loan options that permit no downpayment - do not miss out on your chance for homeownership.

Grants for Community development are also available. These grants may be used to help in the rehabilitation, enlargement, and construction of community facilities. These facilities may include but are not limited to health care, public safety and public services. The funds are generally used for special initiatives such as Native American communities, federal government child care centers for the welfare-to-work initiative.

The USDA Loan program is here to ensure that individuals of the rural communities can compete in the global economy. By allowing communities to obtain these loans they can put into place better community centers, facilities and thus be a place where individuals will relocate and not be hampered by moving to a community that has not been able to update the public facilities. There is over $86 billion in the USDA portfolio of loans and will provide $16 billion in program loans, grants, and USDA rural development program loans.

To introduce yourself to the USDA organization, please visit the USDA home page.

How Do You Find a USDA Choice Home?

You and/or your family are ready to purchase a home in a rural community. You have researched and decided that a USDA home loan guarantee is perfect for you to help obtain a mortgage. You have contacted a USDA approved lender and successfully applied and are pre-approved for a home loan. Now what do you do?

Before you begin searching for your home, there are a few things you must take into consideration. There are restrictions on where the home is located. The home must be construction standards. And the home must meet the size and cost within your approved mortgage budget.

Finding the perfect home is like finding the proverbial needle in a haystack. Add the qualifications required by your mortgage guarantor, and it makes finding the perfect home even harder. But if you start with the limitations and restrictions in mind, you will have a much easier time locating a home that is suitable and functional for your family's needs.

A qualified rural area

A home purchased through the USDA home loan guarantee program must be located in a qualified rural area. Qualified rural area is defined as open country places, and homes in cities with populations of 10,000 or less. Under certain conditions, the home may be located in towns and cities of 10,000 to 25,000 in population. If you have questions regarding whether a potential home is in a qualified area speak with a representative from a USDA Rural Development field office.

New or existing home

You can shop for a new home recently constructed, or an already existing home. If you decide upon purchasing a new home built within the last 12 months, you will need the following:

· A certified home inspection approving the soundness of the foundation, framing, and meeting all local and state codes.

· Certificate of occupancy.

· A builder's 1-year home warranty.

If you decide to look for a home previously built, meaning it was constructed more than 12 month prior, the home must meet the following requirements to qualify for a USDA home loan guarantee:

· Structurally sound - The home must have been built using materials that achieve a structurally sound construction. The home must be in good repair that the time of purchase.

· Functional - The home must adequately functional as a dwelling. An adequate bedroom to bathroom ratio is taken into consideration. A functional home must have running water, appropriate ingress and egress, and adequate heating, cooling and venting. A barn converted into livable quarters may indeed make a good home. But it must meet the functional test.

· Any size or design - A USDA home loan mortgage is good for homes that are any size and design. As long as you the borrower qualify for the mortgage amount, you could purchase any size home that meets the needs of your family. However, the USDA home loan program stipulates that the home must be "modest" in size and design. According to the USDA Rural Development website, modest is "property that is considered modest for the area, does not have market value in excess of the applicable area loan limit, and does not have certain prohibited features."

· Owner occupied only - The home you purchase for yourself or your family must be your primary dwelling. Homes purchased through the USDA home loan guarantee program cannot be income producing, meaning you may not rent the home to others or make it a commercial building.

A previously constructed home must also show documentation and certification of a termite report, as well as a qualified home inspection.

Finding the right home to purchase using the USDA home loan guarantee program can be daunting. But knowing first-hand what you need to look for will help you shorten your shopping time – allowing you to move into a beautiful home soon!

Benefits of a USDA Rural Development Loan

Are you looking to purchase a home in a rural community, but wondering where to begin looking for help with a home mortgage? Good news! The U.S. Dept. of Agriculture (USDA) has developed a home loan guaranty program that can help you find a lender and obtain a home loan mortgage. The USDA Rural Development program offers partnered lenders a guaranty on loans provided to qualified borrowers for housing in rural communities. With the help of this program, you can be living in a home with little or no money down!

A USDA Rural Development home loan offers qualified borrowers a chance to obtain a home loan with easier qualifications and financing options than other conventional loans. Keep in mind that the USDA Rural Development does not fund the mortgage loans. Rather, the program has partnered with selected lenders in all states who will loan the money with a repayment guaranty from the USDA, if ever the loan should default. This offers lenders confidence in providing loans to qualified candidates who meet the USDA Rural Development underwriting guidelines.

Quick look at USDA loan benefits

· No Down Payment Required. Borrowers who qualify for a USDA Rural Development home loan have the flexibility to pay nothing out of pocket for a down payment. That means a borrower can finance up to 100% of the appraised home value. Or, a borrower can have a gift or grant go toward a down payment with no money out of pocket.

· No mortgage insurance payments. Unlike an FHA guaranteed home mortgage, a USDA Rural Development home loan does not require expensive mortgage insurance premiums to be paid by the borrower. That means more money can go toward the mortgage payment each month.

· Competitive 30 year fixed interest rates. With the guaranty of the U.S. government, a lender can offer the lowest interest rates to qualified individuals and families.

· Flexible credit guidelines. Borrowers must still provide a credit history report. But the flexible guidelines allow potential homeowners with spotty or bad credit to still qualify for a home loan.

· No maximum purchase limit. The USDA Rural Development program has no maximum purchase price limit. However, a lender will still determine the maximum amount of loan each applicant is eligible for based on ability to repay.

· Home repairs can be included in loan. Looking to purchase a "handyman special" home? Homes that need refurbishing or rehabilitation may qualify for extra funds to be included in the home loan mortgage to go toward repair costs.

Who is eligible?

Any individual or family who plans to occupy a home located in an eligible rural area as their primary residence may qualify for a USDA Rural Development home loan. An applicant for the USDA mortgage guaranty loan must provide sufficient income verification and a credit history that indicates an ability and willingness to meet repayment obligations. An individual or family must show proper legal capacity to own property in the U.S.A., own no home or dwelling currently, and have insufficient resources to qualify for a conventional home mortgage.

How to get started

Interested future homeowners should contact a local Rural Development Office and obtain an Approved Lender List. Find out if a home or property is included in the Rural Development designated rural area. Generally, rural properties that are located in open country and in towns with a population less than 10,000 are a designated rural area.

With a lender is secured and a qualified rural home is found, an individual or family can begin the application process and soon find themselves in a rural home oasis!

USDA Rural Development Program

Many rural communities across the U.S.A. are drying up and dwindling in population and economic strength. With more and more people moving to the big cities and fewer people continuing the farming business and commercial activity in farming communities, how will small-town America survive?

Enter the United States Dept. of Agriculture (USDA). This executive branch government institution is the biggest promoter of rural development in America. Through the USDA, individuals and families can seek help and assistance with loans for housing, business, and community development, as well as public utilities for rural areas.

Home Financing

The USDA Housing and Community Facilities Program was designed to help low to moderate income families with home ownership in rural communities with populations of 20,000 or less.

Direct home loans Some families may be eligible for home loan funds directly from the Housing and Community Facilities Program. Families with income below 80% of the median income level in certain communities, who do not qualify for conventional loans, may be eligible for this program. With a direct loan from the program, an eligible family can finance new or existing homes.

Home loan guarantee The USDA also provides a home loan guarantee program for eligible individuals and families. The home loan guarantee is made to third-party lending agencies, such as banks and mortgage loan companies who loan money to individuals and families looking to purchase homes in rural communities. With the USDA home loan program, families can borrow up to 100% of a home's value, including closing costs. The USDA assures and guarantees that should a borrower default on a loan the USDA will repay the lender.

Also with the help of USDA home loan programs, home seekers can get help building their own home, or renovating and repairing an existing home for occupancy. The Mutual Self-Help Housing Program provides affordable loans that allow families to invest their own “sweat equity” in building much of their own homes. The Home Repair and Grant Program also offers valuable financial aid to low-income families who own homes to make needed repairs and renovations.

The USDA is committed to the development of rural areas in the United States, and assuring that rural communities receive the financial assistance needed in order to survive and thrive. Through USDA assistance programs, families can obtain home loans, communities can develop community facilities, and utility companies can reach rural areas with essential utility services.

USDA Loan Facts

· The loan money comes directly from the government. You will not have a guaranteed loan from another lender, but an actual loan from the government.

· You can get a loan to purchase a pre-existing home. The USDA offers mortgage loans for homes that are already for sale.

· You can get a loan to purchase land and construct your own home. For this option you will need to have the building contract and land purchase contract so that the USDA will know the full amount of the loan you are applying for. There may be some restrictions on the builder as far as a time frame for finishing the construction.

· You can get a loan to purchase a pre-existing home. The USDA offers mortgage loans for homes that are already for sale.

· You can get 100% financing to purchase a home. With the USDA Rural Home Loan Program you do not have to have any money down to purchase a home. The government offers the zero money down option in order to help low income rural families purchase homes. In many cases these families may be making just enough money to pay rent, and could pay the same amount on a mortgage to own their own home, but don't have any extra money left over to save for a down payment. That is why the USDA does not require any down payment on their direct loans for rural housing.

· Mortgage payments for the USDA loans are based on household income. They consider how much you earn and allow around 26% of that amount to be used towards a mortgage payment. This determines how much of a loan you can afford.

· The USDA Rural Home Loan Program is designed specifically for very low and low income families.

· Loan terms are for up to 33 years or 38 years if your income is so low that you could not afford the monthly payments unless the terms are stretched out for longer.

· If you have a manufactured home the USDA offers loans to help you move your home and purchase a piece of rural land. The maximum loan term for a manufactured home is 30 years.

· The interest rate is based on the rate the government is paying for the money borrowed. However, there is also a program that offers payment assistance in the form of subsidies.