There are a multitude of varying mortgage loans that exist to assist buyers with the home buying process, and they all have different requirements. One such loan, guaranteed by the United States Department of Agriculture (USDA) is called the USDA Rural Development Home Loan. Given the name, many buyers mistakenly believe that it is available only for the purchase of very rural properties, but this is not the case.

USDA Rural Development loans are available to a broad range of home buyers in both rural and suburban areas of the country. USDA home loans are also not specifically geared toward borrowers with rural occupations, such as farming and ranching. Instead, any type of legal occupation that offers sufficient income can qualify. If you are preparing to purchase a home and would like to learn more about this type of home loan, the following information may prove helpful.

USDA Home Loans Have No Down Payment Requirements

Offered as part of the federal government's efforts to improve rural economies and the lives of those who live in these areas, a USDA rural development loan has no down payment requirement. In addition, these loans also offer an interest rate that is lower than many other types of home loans currently available which helps to ensure that repaying the loan will be affordable for the borrower. 

The Three Types of USDA Loans

In order to serve a broader number of borrowers, the USDA offers three types of rural development home loans, each with the ability to fit different home buying segments. These three types are:

• The guaranteed loan: the USDA works with participating local banks and mortgage lenders by guaranteeing mortgages that meet USDA Rural Development requirements. 
• The direct loan: issued directly from the USDA, these loans are primarily directed to the needs of borrowers with low and very low incomes and can offer interest rates as low as one percent. 
• Home improvement grants and loans: these options can be used for the repair or upgrade of qualifying homes, offering a loan of up to $27,500 to be used on its own or in conjunction with the issuance of a USDA home mortgage

Qualifications for a USDA Rural Development Home Loan

In order to qualify for a USDA guaranteed home loan, borrowers should understand they can only utilize this loan program for the purchase of a qualifying, primary residence. Other qualifications specify: 

• The applicant must be a citizen or legal resident of the U.S. 
• The total amount of the monthly payment, including principal, mortgage interest, insurance and property taxes must not exceed 29 percent of the monthly income for the household and other debt payments must not exceed an additional 41 percent
• The applicant has at least 24 months of verifiable, qualifying income
• The applicant has acceptable credit with no collections activity for twelve months preceding the application, although some credit issues, such as those related to a verified medical emergency may not affect qualification

The amount of a Rural development home loan guarantee can vary depending on both household size and the area of the country where the home is to be purchased. Prospective home buyers who are interested in using this type of loan can determine the requirements for their area by utilizing this guide furnished by the USDA or by speaking to a qualified lender in their area.

In addition, prospective buyers can learn more about how the USDA Rural Development Home Loan Program in their area, including helpful information about locating qualifying lenders, by asking their real estate professional to assist them. Agents who have experience in helping buyers utilize the USDA Rural Development Home Loan Program will be especially qualified to assist and guide their clients throughout the process, as well as helping them find homes capable of meeting current guidelines for these loans.