Are You Eligible for a Rural Loan?

by Rudden|Bobruska Team 12/20/2020

Photo by Pete Linforth via Pixabay

Vacant land is a hot commodity – especially for builders. If you’re searching for a home, you may find one in an area that’s growing in population but still offers great lots. Interestingly enough, these areas that look like thriving cities could be zoned in an area deemed “rural.” If so, you may qualify for a rural home loan.

What’s a Rural Home Loan?

Rural home loans are issued by the U.S. Department of Agriculture (USDA) and have specific criteria and qualifications. These loans are designed to provide homeownership to rural and suburban Americans that may not qualify for conventional financing. Here are some advantages:

  • USDA guarantees all loans against default
  • No down payment
  • Lowest funding fee of all loans backed by the government
  • No private mortgage insurance requirement
  • Flexible credit guidelines

How Do I Qualify?

In order to qualify for this program, you must be a U.S. citizen or have permanent residency. Credit scores should be 640 at a minimum and proof of stable income is required. The lenders check payment history – you should have no late payments or collections, and the adjusted household income should be equal to or less than 115% of the area’s median income. The property must be the primary residence and located in a qualified rural area.

There are many places that qualify as rural that will surprise you. Gone are the days where there is nothing around and all you see is miles and miles of empty land. Obtaining a rural loan will allow homeowners to purchase in areas that provide land that’s worth the money.

The USDA Loan Process

The process has a few components involved. First, you must find a lender and prequalify. It’s best to find a lender specializing in this area to get the best benefit. The lender is going to focus on how much you want to borrow, your income and other assets and your monthly debts. In order to qualify, they will do a hard credit inquiry.

After the prequalification to determine how much you are eligible for, you go through the preapproval process which is more in-depth. The lender will require photo identification, tax returns, W-2’s, bank statements, and pay stubs. This is when they determine your debt-to-income ratio to see how much you can actually afford.

The next step is finding a USDA-approved home. This is where you work with a realtor to find properties that appeal to you. Once you find it, it’s time to sign a purchase agreement, go through processing and underwriting, and finally, the closing. Securing the loan is based on the broker, your financial situation and the property you have chosen.

Have you seen a home in a rural area that you like? Now you know the criteria involved with obtaining a USDA loan. Are you ready? The rest is up to you.

About the Author
Author

Rudden|Bobruska Team

Gary Rudden, Lisa Rudden, and Nick Bobruska  

RUDDEN BOBRUSKA TEAM

What sets your team apart from other real estate teams?

There is no team out in the market that offers what we do. All of us are Realtors, but

we each have specialized roles, which make our team so unique!

After decades of living and selling real estate in the DMV, we have established

ourselves as one of the top real estate teams with our market expertise and

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and social media source. We have a huge network with other top agents, which

helps to premarket homes and discover homes for buyers before they reach the

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price ranges. Each client has different needs and we create a marketing plan based

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All work is managed and completed through our licensed and bonded construction

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have a show! Whether it’s a small makeover or a major renovation, we do it all. Our

sellers love this aspect of our team because we make preparing your home for the

market so seamless. Our buyers love the advice and insight we can give for future

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Having a licensed Maryland Home Improvement contractor as part of our team

along with the knowledge, experience, commitment and services that we offer, truly

puts our team as a vanguard in the real estate industry.