news-record.com

A USDA guaranteed home loan?

It’s probably not a U.S. Department of Agriculture service you’ve heard much about, but since 1933 the agency has offered this loan guarantee program to encourage homeownership in rural areas. The USDA Guaranteed Rural Development Loan has several advantages that are harder and harder to find in a home loan these days:

• No down payment.

• No mortgage insurance.

• Low, fixed interest rates.

In order to find out if the USDA Guaranteed Rural Development Loan is a
potential option for your home purchase, consider these program eligibility requirements for the home and the buyers.

 
Eligibility requirements: The home

First and foremost, the location of the home being purchased must be rural by the USDA’s definition.

The department defines rural based on population density. Locations with population densities of 25,000 or less are the areas served by the guaranteed home loans. Several local areas meet the USDA’s definition of rural, including: Browns Summit, Pleasant Garden, Colfax, McLeansville, Gibsonville, Whitsett, parts of Mebane, Liberty, Walkertown, all of Rockingham County, three-fourths of Kernersville, much of Davidson and Randolph counties, all of Davie County and more.

Townhomes and condominiums in USDA rural areas are eligible. There is no limit on the acres that can be included; however, the value of the land cannot be more than 30 percent of the overall appraised value of the property (with the home included) to be USDA guaranteed rural eligible. The property appraisal requirements are very similar to those of the Federal Housing Administration. Homes with in-ground pools are not eligible for USDA guaranteed rural loans.

You can go online to see if an address is considered rural by USDA definition. Start at http://buywithusdaloans.com. A link under the header “Eligible Areas” will take you to the USDA site that lets you plug in an address. Eligible areas within counties can be viewed at that same Web site.

Eligibility requirements: The buyer

In addition to those for the home, there are requirements for the buyers. One of those is household income. There needs to be enough income to pay back the loan, but at the same time the household income cannot exceed the USDA’s established annual limits.

The annual household income limit depends on what county the home is in and on how many people are to live in the home. These are household sizes and the corresponding gross income limits for the Triad area:

• Two-person household: $56,600 annually.

• Four-person household: $70,750 annually.

• Six-person household: $82,050 annually.

So if the incomes of everyone who works in the house total these limits or less, the buyers meet that portion of the income criteria for the Guaranteed Rural Development Loan.
 
Guaranteed loans don’t require perfect credit, but they do look for the most recent 12 to 24 months of credit to be without major blemishes. There is even an option for buyers who don’t have a credit score (because they haven’t used credit) to establish a credit profile with accounts like rent and utilities in lieu of a credit score.

Buyers using guaranteed rural loans cannot own other homes, but they do not have to be first-time homebuyers.
 
While these are the major eligibility highlights for the home and buyer, there are other details about home and buyer requirements for the USDA Guaranteed Rural Development Home Loan. To find out more about those and whether the loan is an option for your home purchase, ask a lender or loan officer. Many, but not all, lenders offer the program.

The following representatives at the N.C. Department of Agriculture can provide contact information for USDA guaranteed rural lenders in your area:

• Dale Darroch, (919) 873-2036, dale.darroch@nc.usda.gov.
• Mel Ellis, (919) 873-2041, mel.ellis@nc.usda.gov.
• Neal Sherrod, (919) 873-2059, neal.sherrod.nc.usda.gov.

With features like no required down payment or mortgage insurance, this loan program is worth investigating as you consider home financing options.