Guide to Rural Development Financing

Post by 
Christine Moore
Published 
December 19, 2018
A

Rural Development is for more than just Farmers.

They are for families

Rural development loans are loans that are insured by the UnitedStates Department of Agriculture to help low to moderate income individuals and families buy single and multi family residencies in Rural Areas.  They define “rural” as a population less than 8,000, and eligibility is shown on a map to include most of Southwestern Michigan, excluding only The city limits of Niles, St. Joseph and Benton Harbor.   There are two types of “RD”financing, direct and insured. 

 

The USDA does make direct loans to home buyers, there is a lengthy process to become eligible for direct loans, including the completion of a class, and rigorous loan processing standards.  For this reason most people go for the insured variety of RD financing.

 

 

In my career RD has been a savior, getting deals done when other financing hasn’t worked out.  Luckily the area I cover is eligible for RD financing.   Rural Development is similar to FHA, in that it helps home buyers to buy a home with little money down, and many times offer very competitive rates.

To determine if you meet the eligibility requirements visit http://www.rurdev.usda.gov,there are many useful links on this site, which is designed to help you.

How to Qualify for RD Loan

 

  • Property must be located in a Rural area
  • Must not exceed the maximum income requirements for county, there is a chart here, http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=pageLoad&requestInfo=GuaranteedIncomeLimits&NavKey=incomelimit@12
  • 100% financing, no down payment is required. The loan amount may not exceed 100% of the appraised value, plus the guarantee fee may be included.
  • Guarantee Fee applies: may be rolled into the loan amount.
  • Flexiblec redit guidelines. Non-traditional credit histories may be accepted.
  • Fixed 30year interest rates apply. Lenders and applicants agree upon interest rate.
  • Qualifying ratios are 29% for housing costs and 41% for total debt.Lenders may request an exception to exceed these ratios when strong compensating factors are identified
  • Not limited to first time homebuyers.
  • Eligible repairs and improvements may be included in the loan.

What to Do Next

 The USDA web site is great, and there is a lot of information there.  Freedom Realty has experience with RD loans, and we can even recommend a few tricks and tips that can make the experience a little easier.

 First if you are getting USDA direct financing you’ll want to contact the local RD service office, to get the ball rolling.  Get directf inancing if you have not money down, are low to very low income,  have the time to meet their education requirements and plan to live in your home for at least 5 years.

 f you would like to get the insured RD financing contact your local mortgage broker or banker and ask them if they have experience doing RD loans.   Any lender can become RD certified and write RD loans, but it is important  to get someone who has experience with these products, asit can make the process a little easier.  Also make sure your Real Estatea gent has experience with the RD product.  As luck would have it FreedomRealty can help you purchase your home with little or no money down with RuralDevelopment financing in Southwest Michigan.

 

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