What is Rural Housing?

People buying a house in a designated rural area can avail of 100% financing mortgage using the USDA Home Loan Program.

The definition of “rural” according to the dictionary of the United States Department of Agriculture is quite different from the common definition of ‘rural’ that most people know. The definition is so different that people living in most places could actually be living in a town that is regarded as ‘rural’.

In addition to some towns falling under the category of rural areas, according to the definition of the USDA, about half of Texas counties are also considered as ‘rural.’ A lot of cities in Texas are located inside the USDA eligible area map that qualifies as ‘rural.’

The relatively broad categorization of rural areas by the United States Department of Agriculture provides prospective homebuyers a wide number of homes to consider. Realtors can also benefit from the categorization, allowing them to utilize the program through their preferred mortgage lender.

Qualification Requirements for Rural Housing Loan                                usda home loans 100% financing

The Rural Housing has some requirements that must be met before applicants can benefit from the program. Below are the key requirements that applicants must meet to benefit from the program.

  • The home to be purchased using the program must be located within a qualifying area. Intending mortgage borrowers can view the eligibility map of the areas to check for qualified properties in the area.
  • The program is not designed for borrowers to make money. The property they’re looking to buy cannot be an income-generating property. No second homes, nor investment properties are allowed. The property must be used as a primary residence only.
  • Income limits are set by the Rural Housing Service based on each area. The household income for USDA Guaranteed home loans cannot exceed 115% of the area median income or AMI.
  • Borrowers cannot purchase homes that have an in-ground swimming pool.

It can be clearly seen from the requirements mentioned above that qualifying for RHS home loans is relatively easy compared to conventional home loans.

Benefits of RHS Loan Program

The benefits of RHS loan program cannot be overemphasized. One of the most prominent benefits of the program is the 100 percent financing feature. However, 100 percent financing is just one of the many benefits of the program. This is particularly true considering the climate of the real estate sector.

It is known that banks attempt to sell their foreclosed properties as quickly as possible. Therefore, this provides a great opportunity for prospective home buyers, allowing them to buy homes below the market value. First-time homebuyers will particularly find RHS home loans attractive, thanks to the full 100% financing and low-interest rates.

While 100 percent financing is one of the features of the loan program, this feature does not actually mean 100 percent of the purchase price. One hundred percent financing means 100 percent of the appraised value of the home. The guidelines also show that homebuyers can borrow as much as 102% of the appraised value, including the 2 percent guarantee fee paid to the USDA. This allows home buyers to keep their savings and provide some form of financial security. Other benefits include flexible credit guidelines and no Monthly Mortgage Insurance Premium.

by nico2me