What You Need to Know About Rural Housing Programs

Rural Housing Programs Defined

According to the United States Department of Agriculture (USDA), Rural Development’s purpose is to provide, “Well built, affordable housing [that] is essential to the vitality of communities in rural America. Rural Development’s Single Family Housing Programs give families and individuals the opportunity to buy, build, or repair affordable homes located in rural America. Eligibility for these loans, loan guarantees, and grants is based on income and varies according to the average median income for each area.”

Benefits for Buyers Using Rural Development Loans

What this means is that USDA Rural Development allows people who qualify the chance to purchase or build a new single-family home, to repair their existing home, or to refinance their current mortgage under particular circumstances. USDA Rural Development loans allow buyers to do so with no down payment, are much more lenient borrower qualifications, and usually offer lower interest rates and less spent on mortgage insurance. Compared to other government back loans like the FHA or VA loan, the USDA Rural Development loan offers some of the lowest fees and costs outside of a conventional loan. 

Benefits for Rural Communities

In addition to buyers benefitting significantly from Rural Development loans, often the rural communities where homes are built, repaired, or refinanced stand to gain from the program as well. The USDA is a federal agency whose mission is to aid and assist rural communities with improved quality of life and increased economic development. Similarly, other federal loan and grant programs that fall under the USDA help to fund infrastructure and improve public services and facilities within these communities. 

What Are the Downsides? 

For starters, the USDA has very strict guidelines on both income limits of prospective users of this program as well as limitations on specific property locations where the loan may be used. The USDA website has many useful tools to search specific property addresses and calculators to determine income eligibility. Therefore, not every person will qualify based on income, and not every property will qualify based on location. It is also advisable to be sure to read all of the fine print for USDA Rural Development loan terms as they do come with annual mortgage insurance premiums for the lifetime of the loan. These rates are usually lower than some other types of government-funded loan products. 

Rural Development Loans in Real Time Real Estate

While these loans certainly have their place for those who may be eligible and interested, one thing to keep in mind is that in the current real estate market where the supply of homes is low and demand is high, homes where there is a lot of competition for purchase may be more difficult to purchase using a government-funded loan. Due to extra time for processing, extra fees, and extra red tape, sellers who are met with multiple offers will oftentimes choose the buyer who is able to buy with a conventional loan. 

A trusted, licensed real estate professional or mortgage lender will be able to help you answer any questions you may have about the process of utilizing this option for a mortgage loan.

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