Part 3d: Loan Programs – An Introduction and Part I

Part 3d: Loan Programs – An Introduction to USDA Home Loans

USDA Loan Program

The USDA or United States Department of Agriculture Loan Program specifically targets those willing to purchase a home in more rural areas. This government program helps lower income families or individuals obtain a home in eligible locations. There are requirements for the homes being purchased, as well as requirements for the applicant. For example, these homes must pass sanitary and safety guidelines in order to be purchased under this loan program. The loan program will approve new construction as well as existing homes, as long as they fulfill the sanitary and safety guidelines outlined in the most recent HUD Handbook, and also as long as the home resides within an eligible location. This home must be the primary dwelling being purchased, which means this home cannot be a second or third home. Additionally, any amenities that can be seen as income-producing may also disqualify a home for a USDA Loan. An example of an income-producing amenities would be a fully functional kitchen, bathroom and bedroom in the basement accompanied by a second entrance. This may give the impression that the home may be rented out in the future, therefore becoming income-producing.

There are income restrictions and guidelines for obtaining a USDA Loan. The income guidelines can be found here. In addition to income guidelines, lenders will ask for household assets for those over 18 that will be residing in the new home for eligibility as well. There are more guidelines to this program, which can be found here.

• Pros
  • Loan program is available to those with lower income, as well has easier credit history/score requirements.
  • Allows for low or even no down payment at all.
  • Homes purchased must be sanitary and safe, which insures the buyer purchases a quality dwelling.
• Cons
  • There are income restrictions to this program. All household assets and income must be documented for eligibility.
  • Requirements of the program dictate that the homebuyer MUST be purchasing a primary residence, and any evidence of income-producing additions to the home will make that home ineligible for purchase.
  • Not all homes are eligible for purchase with this program.

We will be discussing FHA Home Loans in the next section in similar format, including the Pros and Cons.