A Short Guide to the USDA’s No-Money-Down Programs
The United States Department of Agriculture’s , (USDA), mission is to foster rural development and build stronger communities in these areas. To this end, the USDA offers a couple of no-money-down mortgage programs designed to help low-income and middle-income families purchase property in a rural area.
Taking advantage of one of the programs offered by the USDA is an excellent option if you’re interested in moving to a rural area and cannot afford a down payment. You’ll have to meet a few requirements in order to qualify for a loan, but the USDA offers a straightforward financing process and many helpful resources on their official website at usda.gov.
This is what you need to know about the USDA programs before you get started:
The USDA offers two different financing options:
- Single family housing direct home loans. These loans are issued by the USDA and are actually considered as subsidies. You can use this type of loan to buy a property, repair, relocate a home or install utilities. These loans have a low fixed interest rate** and you can take between 33 and 38 years to pay it back, depending on your income.
- Single family housing guaranteed loan program. If you qualify for this program, the USDA will issue you a note for 90% of the value of the property you are interested in. You can then take this note to an approved lender and use the money to buy, repair, relocate a home, or refinance an existing loan and install utilities.
The USDA will issue you a loan or a note you can take to a lender as long as you meet these criteria:
- Your income is one of the main things the USDA looks at to determine if you qualify for one of their programs.
- The USDA has set income limits by state and county. Your income has to be below a certain level in order for you to qualify as a low income or very low income applicant. Check income requirements by state and county on the official USDA website.
- You have to prove that you’ll be able to pay the loan back. The USDA will look at documentation of your income, assets, and existing debt to determine how much you can afford to spend on monthly loan payments.
- Additional requirements*: You must be able to prove that you don’t have access to proper housing on your current income and that you don’t qualify for financing through other institutions.
- Requirements for the property you purchase:
- The property has to be located in an area covered by this program. The USDA typically issues loans or notes for properties located in remote rural areas*.
- The property should be modest by local standards. You won’t be able to purchase a home if it’s value exceeds the loan limit set by the USDA for the area.
- Other requirements: The property must be your main residence. It cannot have an in-ground swimming pool. And, it cannot be designed for the owner to run a business from it.
There are a couple of downsides to financing a home through a USDA program: 1) the home you want to buy might not qualify for one of these programs and 2) the guidelines set by the USDA limit what you can or cannot do with the money you borrow. If you do not qualify for a USDA loan, we assure you that we will do our best to find the best loan, custom-tailored to your specific situation.
However, these two programs are excellent options if your low income has made it difficult to consider home ownership. Contact us to learn more about the rural areas covered by these programs and find out whether or not you might be eligible for a loan. You might be surprised at the areas that qualify for this type of loan!
Home is where you’re Accepted
*Contact our office today to find out more information as it applies to your specific situation.
What governs this program?
HB-1-3555 – SFH Guaranteed Loan Program Technical Handbook
Although Acceptance Capital is an approved lender, we are in no way part of, or affiliated with, the USDA . All information provided is solely for educational purposes only. USDA.gov is the U.S. government’s official web portal.