A Guide to the USDA’s No-Money-Down Homeownership Programs
The United States Department of Agriculture’s (USDA) Rural Development mission is to foster rural development and build stronger communities in these areas. To this end, the USDA Rural Development agency offers a couple of no-money-down mortgage programs designed to help low-income and middle-income families purchase a 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:
1.Single family housing direct home loans. These loans are issues by the USDA and are actually considered as subsidies. You can use this type of loan to buy a property, repair, or 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.
2.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, or relocate a home or to refinancing an existing loan or 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:
1.Income. 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 requirement. 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.
2.Requirements for the property you purchase:
Location. 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.
Value. The property should be modest by local standards. You won’t be able to purchase a home if its value exceeds the loan limit set by the USDA for this 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 few downsides to financing a home through a USDA Rural Development program. The home you want to buy might not qualify for one of these programs. Also, the guidelines set by the USDA limit what you can do with the money you borrow.
However, these two programs are excellent options if your low income has made it difficult to consider home ownership.
Visit the official USDA website to learn more about the rural areas covered by these programs and find out whether or not you might be eligible for a loan. (www.eligibilit.sc.egov.usda.gov/eligibility/welcomeAction.do)
The National Black Farmers Association provides advocacy, outreach and direct technical assistance for potential, new and beginning farmers to participate in USDA programs and services.
For technical assistance, please contact Kara Brewer Boyd, NBFA Program Coordinator via email: NBFA.Kara@gmail.com or call (804) 691-8528.
