Buying a home can be stressful, but getting a home loan doesn’t have to be. There are several mortgage options available to homebuyers. One of the most powerful loan options available, the USDA Rural Development Loan, can help rural and suburban homebuyers realize the American dream. The program, also known as section 502 home loans, offers zero money down, 100% financing, and competitive mortgage rates to homebuyers seeking to live in areas deemed rural.
There are several advantages to securing a rural development loan.
No Down Payment
A USDA Rural Development loan is one of the only mortgages available that doesn’t require a down payment. This program doesn’t actually fund the loans, but it offers a federal guarantee of a portion of repayment to select lenders. This allows selected lenders to take on more risk at terms that are advantageous to borrowers. These loans offer 100% financing to qualified borrowers. This means a home is within your reach without saving thousands of dollars upfront. Even lending fees, closing costs, and renovation and repair costs can be rolled into the cost of the loan.
30-Year Fixed Rates
Many mortgages, especially for first time borrowers, require either a hefty down payment or use an adjustable interest rate. Adjustable rates can increase over time, making what was once an affordable house payment out of reach. With a fixed mortgage, a borrower always knows how much they will pay each month for interest and loan repayments. That cost is fixed for up to 30 years with a USDA Rural Development loan. The loans also offer competitive interest rates. Lenders can also offer 15-year fixed rate loans with competitive interest rates.
No Maximum Purchase Price
Many loans set a maximum purchase price. These purchase price ceilings can make it difficult for homebuyers to purchase even modest homes in the most expensive parts of the country. Under the USDA Rural Development loan program, there is no maximum purchase price. Selected lenders, however, can set a maximum loan amount for applicants based on each potential borrower’s ability to repay. An individual’s maximum loan amount is determined based on their debt-to-income ratio.
Flexible Credit Guidelines
The primary requirement for using this federally-guaranteed loan program is the property location--not a borrower’s credit history, though credit history matters. Spotty or bad credit won’t automatically disqualify a buyer from this program. Loan applicants must show that they have sufficient income to make mortgage payments. Lenders can also set some of their own requirements for granting a USDA Rural Development loan. Also, potential homeowners must plan to occupy a home if purchased under this mortgage program and the home must be located in a qualifying area.
Many Property Types Eligible
Section 502 home loans are available for several different types of properties, including existing homes, modular homes, condos and manufactured homes.