USDA - Rural Development
1. Why choose a Rural Development Guarantee loan?
Simple! USDA Rural Development Guarantee loans are true 100% financing loans. They require zero down payment and no private mortgage insurance – two costs associated with loans that are in excess of 80% of the sales price or appraised value.
The USDA RDG loans are set for 30 years at a fixed rate, and there is no limit on the price you pay for the home. The only qualifying factor for the home itself is that it be situated within an approved USDA eligible area.
Click here to see if the home you are looking to buy is in an eligible area. http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
2. Can I Save Money by Using the USDA Rural Development Grant Program?
Yes. Take, for example, a loan for $100,000.00. By taking out a USDA Rural Development loan, the borrower saves $4,290.00 in the first 10 years over what they’d pay out on an FHA loan. Why? For one reason – USDA RD loans don’t have any monthly Mortgage Insurance requirement!
Please remember that it is difficult to drop PMI or mortgage insurance, and lenders usually will not drop it from your monthly payment unless you ask them to. This is NOT an issue with the RD loan since MI is not required.
3. Is the USDA Providing the Funds for These Loans?
No. Much like the FHA, USDA Rural Development Single Family Housing Program functions as a backstop or safety net for mortgage lenders – in effect guaranteeing that they are protected in the event you default on your loan.
This guarantee grants lenders protection against losses. The quality of this USDA guarantee is what allows lenders to easily sell the loans on the secondary market. As a result, they feel free to lend funds in cases where other non-participating lenders may not.
4. What Type of Credit Do I Need in Order to Qualify?
Typically, the good folks over at the USDA financing office like to see minimum credit scores at or very close to 620. Borrowers with credit scores as low as 580 may be approved; however, they may not have any of the following:
- Foreclosure in past 36 months.
- Bankruptcy discharged within 36 months.
- More than one 30 day late on consumer debts in past 12 months.
- Accounts converted to collections within past 12 months.
- Tax liens or delinquent government debts (including student loans).
- Judgments outstanding in past 12 months.
- Outstanding collection accounts.
Note: Lenders are permitted to use a non-traditional credit report or verify your creditworthiness with other sources, such as: utility payment records; rental payments; insurance payments; child care payments; payments to local stores, payments on medical bills, etc.
5. Are there Minimum and Maximum Loan Amounts Associated with USDA Rural Development Loans?
There is NO minimum loan amount for the USDA Rural Development loan program. However, maximums do apply. Typically, borrowers are limited to the appraised value of the home plus the 2 percent Guarantee Fee. The great news here is that you may finance 100 percent of the purchase price of your home (102 percent if you are financing in the 2 percent Guarantee Fee).
Note: The Guarantee Fee is a fee charged by Rural Development. This fee is equal to 2 percent of the final loan amount and may be financed into the loan itself
6. What Will Be Included in My Monthly Payment?
The monthly payment will include principal, interest and the monthly cost of real estate taxes and insurance.
7. How Are Closing Costs, Fees, etc. paid on the USDA Rural Development Loan?
These fees and other eligible costs – including some repair/rehab costs - may be rolled into the loan. Again, 100 percent means NO out of pocket expenses at closing!
8. What areas are considered eligible for the USDA Rural Development Loan Program?
If the property is in one of the following counties, you can check an address or see a map at: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
The site will give a “yes” or “no” upon entering an address.
9. What are Rural Development’s income limits?
For USDA Rural Development income limits go here.
10. Can I get cash back from closing to pay off other loans or refinance my credit cards?
No, the goal here with the USDA Rural Development land is strictly to cover 100 percent of your home purchase expenses, not to provide a means of reducing your other debts.