USDA Rural Home Loans, A True Zero Down Home Loan
The US Department of Agriculture offers the USDA Rural Home Loan program, a true zero down home loan. The purpose of the program is to assist families living in rural areas and who meet certain income limitations.
The main benefit of this program is that no down payment is required and the interest rate is very similar to the rates on Fannie Mae, Freddie Mac, FHA, or VA home loans. Closing costs can come from any source – as a gift from a relative, paid for by the seller, or even charged to your credit card if necessary.
The USDA Rural Home Loan can be used to purchase an existing home or to refinance an existing Rural Housing loan.
The program is designed to assist low and moderate income families whose income does not exceed 115% of the area median income. For the Spokane area this income limit is $74,050 for a family of 4 and $97,750 for a family of 5 or more. Those limits are the same for all the surrounding counties. Those are pretty high limits and can support home prices of upwards of $417,000. For income limits in other areas check out USDA’s Income Eligibility page. (This is best viewed in Internet Explorer)
For eligibility purposes lenders are required to add up the income from all inhabitants of the home, aged 18 years or older, regardless of whether they are on the loan or not. From that figure however, there is a list of deductions lenders can use to reduce your income for any dependents, elderly or disabled family members, or verified child care expenses. We’ve been able to used these deductions to bring some applicant’s income back under the USDA’s eligibility limit.
The second criteria to be eligible for this program are that the property be located in a rural area. Properties in Spokane are NOT eligible but you don’t have to get very far outside the city center before you are into eligible territory. All of the surrounding counties to Spokane are 100% eligible. The one notable exception is that the Suncrest area is ineligible as well.
USDA maintains very detailed maps of the eligible areas. (This is best viewed in Internet Explorer)
While rural properties are required, they must be homes. You can’t finance a farm or income producing property like a vineyard, orchard, or tree farm. Manufactured homes not allowed, although this is a lender limitation, not a USDA limitation.
Interest rates on the Rural Home Loan are very similar to Conventional, VA, and FHA loans so there is definitely no “penalty” for using the program. They do not have a monthly mortgage insurance fee to be paid, like there is on Conventional or FHA loans, but there is an upfront Guarantee Fee which can be finance into the loan.
The USDA Guaranteed Rural Home Loan is an excellent program to help families who need assistance and want to live in a rural setting. To find out how the Rural Home Loan can help you, just give us a call or hit the big “Apply Now” button at the top right.