Accredited lenders offer the RD Rural Housing loan to qualified applicants searching for a new home. This loan program has become one of the most popular mortgage choices because it’s affordable and available to almost all buyers. The RD Rural Housing loan is relatively new, having been developed in the 1990s by the USDA. The primary purpose is to provide low- to moderate- income individuals and families with affordable housing and down payment assistance.
The RD Rural Housing loan is available to applicants residing or wishing to move to rural areas. These areas can include open country, small cities and towns of fewer than 35,000 residents, and communities on the outskirts of major cities. There is no purchase price limit for homes under the RD Rural Housing loan, but there are qualifications for borrowers:
- They must meet income eligibility. Since the RD Rural Housing loan was developed with intentions of helping lower income families purchase a home, there are limits to how much they earn per year. The limits are determined by the per capita income in a given geographical area.
- They must be a U.S. citizen, Qualified Alien, or Non-citizen National and possess proper paperwork.
- They need to prove financial ability to afford the home in question.
- They must meet credit standards, which are lenient compared to comparable loan programs.
- They can’t have any outstanding federal debt, such as delinquent student loans, or be suspended from federal programs.
- They should intend to occupy the home as their primary residence.
RD Rural Housing standards are much easier to meet than comparable loan programs. The credit requirements approve scores of 620, which is at least 20 points higher than FHA. It also only requires 2 current lines of credit that have been active for 12 months. Applicants can be approved for the RD Rural Housing loan within 3 years of being discharged from a bankruptcy or foreclosure, whereas they would have to wait at least 7 years to get an FHA loan.
RD Rural Housing is 100% financed, so there is no down payment from the borrower. The only other loan that is down payment-free is the VA loan and it is only available to Veterans. If an applicant meets all the requirements and want to purchase a home in a rural area, they can be approved for the RD Rural Housing loan. Other loan programs put a limit on the amount of closing costs and fees that can be covered by the seller, but there is no limit with this loan. You can close on a new home with no money out of pocket. The RD Rural Housing loan doesn’t take any longer to process than other loan programs.