Weichert Realtor Equity Tarpon
Don Atwood, Weichert Realtor Equity TarponPhone: (727) 992-5469
Email: [email protected]

Do I Qualify for a Rural Loan?

by Don Atwood 10/20/2021

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

Don Atwood

I have been in the Real Estate profession for over 19 years now having sold hundreds of homes during that time with prices ranging from $50,000 to over $1,000,000. I have held licenses in three states during my career. I have sold over $55,000,000 in my career consisting of regular transaction homes, short sale homes, bank owned homes, lease option homes and commercial listings. I work hard for my clients, both buyers and sellers getting them the very best deal possible. I come from a business background so I know how to deal with complicated Real Estate deals. Proud to say I'm a VETERAN having served in the Army during the Vietnam War. I am well versed in all transactions that take place and I’m a very skilled negotiator.