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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.
February 16, 2011 by Michael Mullin · 2 Comments
Author: Michael Mullin (NMLS #11911) has been helping families with FHA, VA, USDA and Conventional loans for 22 years. Want help with buying again after a short sale, foreclosure, or bankruptcy? His passion is educating borrowers so they can make smart decisions about their financing options. He is a Branch Manager and Mortgage Loan Originator with First Priority Financial, Inc. and is licensed in both Washington state and California. To get more information call (509) 252-9151 or email 
Hi Mike,
I ran across your site while trying to find information about the USDA rural home loan program. Perhaps you can
answer a question for me. I turned all my prequalification paperwork in to the USDA office in Oct. 2010 and was told that I qualify for a loan of $130,000. I live in Siskiyou County, CA. At the time, they told me that their funding had run out and they would be getting new funding for this fiscal year sometime between November and February. I’ve contacted them monthly since then, but they’re still saying there’s no money available. Does this sound right to you? I’m kind of confused about how this program really works! I’ve actually found a home that I would consider buying, but now I’m worried that it’s going to sell before I can get a loan.
Thanks so much for your help.
Jan
Jan, that would certainly be frustrating! I’ve emailed you a couple of questions to clarify. We’ll get you some help.