Rural Development Home Loan
Want to homestead or live in the country in your own house, but think you can’t get a loan? Read on to find out if you might be eligible for a Rural Development Home Loan
The USDA has a program called Rural Development Home Loans that assists individuals with funding to acquire an existing home or for building a new home in a qualifying rural area. There are several eligibility requirements for this type of assistance, mostly relating to income and location. Most, if not all, of the land we have available to purchase is in an area that qualifies for a USDA Rural Development Home Loan.
This program provides resources for obtaining a loan for building a new home on rural land or for an existing home on qualifying land. It is geared towards low and very-low income individuals and households who:
- Are without decent, safe and sanitary housing
- Are unable to obtain a loan from other resources on terms and conditions that can reasonably be expected to meet
- Agree to occupy the property as their primary residence
- Have the legal capacity to incur a loan obligation
- Meet citizenship or eligible non-citizen requirements
- Are not suspended or debarred from participation in federal programs
The exact income requirements are based on the area in which the individual or household is applying, but at the very least must have an adjusted income that is at or below the low-income limit for their area and must also demonstrate a willingness and ability to pay back the loan.
There are two different types of loans offered through the Rural Development Home Loan program: DIRECT LOANS and GUARANTEED LOANS. Guaranteed loans are partially backed by the government, but utilize approved private lenders and are subject to private lender’s terms. Direct loans, as implied, are available directly through the government program as a subsidy to increase an individual’s/household’s repayment ability.
Guaranteed loans are through USDA approved lenders and are subject to specific requirements regarding loan amount available, an individual’s credit scores, and standard repayment terms, such as 15-30 years. The funds may be used to build a new house, rehabilitate or improve an existing house, or relocate a house to a rural area. This includes:
- new/existing residential property, including closing costs
- purchasing a site with an existing dwelling or for a new dwelling
- refinancing of an existing loan
- repairs for an existing home
- equipment and designs for accommodating a family member who is disabled
- connection costs for utilities, such as sewer, water, broadband
- household essentials: appliances, flooring, etc
- purchase/installation of energy efficient equipment such as solar panels, double-pane windows, etc
- site preparation costs, grading, landscaping, driveways, fencing, and such
Direct loans offer fixed interest rates based on current borrowing rates either at the time of application or at signing, whichever is lower. This is then combined with the government subsidy to reduce the rate to as low as 1%. The loan term is available for up to 33 years, and 38 years for very low-income applicants. Typically a down payment is not required. While the guaranteed loan program has a detailed list of how funds may be used, the direct loan program is far less specific, stating they may be used to “build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities”.
While it may seem that home ownership is an impossible dream, there are many options to explore in order to make that dream a reality. The Rural Development Home Loan program can be a viable option for those who have been unable to get financing before. And what better place to do so than in the great state of Texas? Check out The Top Ten Reasons Everyone is Moving to Texas if you aren’t convinced yet.
The land we have available in the Austin/San Antonio area, as well as in the Dallas area are in eligible areas for Rural Development Home Loans, making it that much easier to apply. Contact us for more information about our land, or explore these links for more information about the USDA Rural Development program.
Rural Development Home Loan eligibility requirements, click here
Rural Development Direct Loan Program, click here
Rural Development Guaranteed Loan Program, click here