For this blog series, we’ll be explaining what the USDA home loan program is, it’s main goals, and how to apply. This is going to be a three part series, as we want to make sure you have all of the information on this specific loan program!
- 1 Minute | No Hard Credit Check
What is the USDA Loan Program?
The USDA or United States Department of Agriculture Loan Program is a loan program created and operated by the USDA’s Rural Development Housing and Community Facilities as an incentive for prospective borrowers to purchase homes in rural areas.
This government program helps lower income families or individuals obtain a home in eligible locations. The USDA itself is the department that manages government programs related to food, agriculture, development of rural areas, nutrition, and natural resources.
One of the USDA’s responsibilities, the development of rural areas, includes residential development which is aided by the creation of the USDA loan program. This program serves as an incentive for borrowers to inhabit and develop rural areas by providing financial assistance for purchasing and refinancing rural homes.
This allows the USDA to provide home loans to very low-income borrowers as well as grants for home improvement, as long as the home in both situations is in a rural area.
Why Was the USDA Loan Program Created?
This loan’s focus is to aid in one of the USDA’s main goals: development of rural areas. This is done by encouraging borrowers to purchase homes in rural areas, which helps build up and develop rural communities.
The USDA also creates the opportunity for low-income applicants to purchase a home that is safe and sanitary by providing this loan program. One of the most effective ways to develop a rural area is to increase the population. Increased population will help stimulate the growth of a rural community, including the opening of businesses, cultivating of land for farming and agriculture, and other positive effects.
How to Apply For the USDA Loan Program: Eligibility Requirements
In order for someone to apply for the USDA Loan Program, there are requirements for the homes being purchased, as well as requirements for the applicant. These homes must pass sanitary and safety guidelines in order to be purchased.
The USDA 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 rural location.
This home must be the borrower’s primary dwelling, 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 an income-producing property.
The borrower also has requirements that need to be met in order to be eligible. These requirements are categorized as credit and income.
The USDA has income requirements based on the median income of an area (this is the average income a family brings in a specific location). In order to determine eligibility, the family or individual applying for services must be at very low income, which is below 50 percent of the area median income, or low income, which is between 50 and 80 percent of the area median income.
For the next part, we’ll be discussing more about what it’s like to go through the USDA Loan program
- 1 Minute | No Hard Credit Check
