USDA Rural Development Single Family Home Funding Rules

Here are the high points of the program.

  • No Down Payment
  • 30 year fixed rate
  • 102% LTV (100% plus guarantee fee)

Finance Closing Costs If Appraisal Is Higher Than Sales Contract

  • No Mortgage Insurance
  • No cash contribution required from borrower
  • Income Limits (by county)
  • Unrestricted gifts, no need to document source
  • No Maximum Loan Amount
  • No Cash Reserve Requirements

Acceptable credit history:

  • Credit history with willingness to meet obligations
  • Streamlined credit approval when primary applicant has a middle credit score above 620
  • No minimum credit scores
  • Lack of credit is not derogatory
  • Caution for applicant(s) with multiple layers of risk such as:
    • Payment shock
    • Low credit scores;
    • Ratio waiver
    • Credit waivers
    • 2-1 buy downs

Other eligibility criteria:

  • Borrower does not currently own a home
  • Borrower has insufficient resources to secure conventional mortgage
  • Borrower is a U.S. citizen or permanent resident or qualified alien
  • Borrower has the legal capacity to own a home
  • Home purchased will serve as borrower’s primary residence

Loan-To-Value (LTV) and Loan Limit:

  • 100% LTV plus the amount of the guarantee if financed
  • Loan amount can exceed appraised value by the amount of the guarantee fee
  • There is no loan limit
    • Limiting factors will be ratios and income limit

Property requirements:

  • New or proposed home construction:
  • Both new and existing: Private well water quality must meet local and state code.
    • New manufactured homes: Rural Development will finance new manufactured homes through approved dealer-contractors. List of approved dealer-contractors (thru USDA) and details on how new manufactured homes can be financed.
    • Modular homes: New or existing modular homes can be financed the same as stick built homes.
    • Condo: Rural Development can finance if it meets the standards for Fannie Mae, Freddie Mac, VA, or FHA.
    • Town home: Same as condo. A town home must have provisions for maintenance such as HOA.

Refinance: When and if refi funds become available,

  • Guarantee Fee is .5% of the loan amount
  • 100% Appraisal Value
  • No Mortgage Insurance

Prohibited Loan Purposes:

  • Co-signors not residing in the household
  • In-ground swimming pools
  • Construction draws
  • Furniture and personal property
  • Income producing property
  • Non-essential buildings and land
  • Previously occupied manufactured homes
Did You Catch All That?
If not, here’s the translation:

Not every community qualifies-but if it does, this Rural Development mortgage loan is one of the best deals for homebuyers out there!

Contact us to see which properties qualify for this outstanding loan program.