USDA Single Family Housing Guaranteed Loan Program

USDA Single Family Housing Guaranteed Loan Program

Are you looking for a way to buy or build your dream home in a rural area? If so, you might want to consider the USDA Single Family Housing Guaranteed Loan Program. This program is designed to help low- and moderate-income households achieve homeownership with no money down and competitive interest rates. 

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In this article, I will explain what this program is, how it works, who can apply, and what are the benefits of using it. Let’s get started! 

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What is the USDA Single Family Housing Guaranteed Loan Program? 

The USDA Single Family Housing Guaranteed Loan Program is a federal program that provides loan guarantees to approved lenders who offer loans to eligible rural homebuyers. The program is administered by the Rural Housing Service (RHS), which is part of the U.S. Department of Agriculture (USDA). 

The purpose of this program is to help rural residents with incomes below 115% of the area median income (AMI) who are unable to obtain adequate housing through conventional financing. The program also aims to promote prosperity and improve the quality of life in rural areas. 

How does it work? 

The USDA Single Family Housing Guaranteed Loan Program works by guaranteeing up to 90% of the loan amount in case of default by the borrower. This reduces the risk for lenders and allows them to offer 100% financing (no down payment required) and favorable terms (30-year fixed rates) to eligible borrowers. 

To apply for this program, you need to find an approved lender who participates in it. You can use this tool on USDA’s website to search for lenders near you. You will also need to meet certain eligibility criteria, such as: 

  • Having a steady income that does not exceed 115% of AMI for your area 
  • Agreeing to occupy the property as your primary residence 
  • Being a U.S. citizen, U.S. non-citizen national or qualified alien 
  • Having a credit history that shows a reasonable ability and willingness to repay debts 
  • Having an income that is sufficient to cover your monthly payments and other obligations 

You can use this tool on USDA’s website to check your income eligibility and this tool on USDA’s website to check if your property is located in an eligible rural area. 

If you meet these criteria, you can apply for a loan with your chosen lender. The lender will then process your application and submit it to RHS for approval. If approved, you can close on your loan and move into your new home! 

What are the benefits of using this program? 

The USDA Single Family Housing Guaranteed Loan Program offers several benefits for borrowers who qualify, such as: 

  • No down payment required: You can finance 100% of the purchase price or appraised value of your property (whichever is lower), which means you don’t need any savings or gift funds for closing costs. 
  • Competitive interest rates: You can enjoy lower interest rates than those offered by conventional loans or other government-backed loans (such as FHA or VA loans). 
  • Flexible credit requirements: You don’t need a perfect credit score or history to qualify for this program. As long as you have a minimum credit score of 640 and no major delinquencies or defaults in the past two years, you should be eligible. 
  • No mortgage insurance needed: Unlike other programs that require you to pay an upfront or monthly fee for mortgage insurance, this program does not require any additional fees apart from an upfront guarantee fee (which can be rolled into your loan amount) and an annual fee (which is based on your loan balance). 
  • No maximum loan amount: You can borrow as much as you need based on your income eligibility and debt-to-income ratio. 
  • No restrictions on property type: You can use this program to buy or build any type of single-family home that meets RHS standards for safety, quality, and environmental compliance. 

Q&A 

What is the Section 502 Guaranteed Loan Program?

The Section 502 Guaranteed Loan Program assists approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas. (“Single Family Housing Guaranteed Loan Program”) (“Single Family Housing Guaranteed Loan Program”) 

What is the USDA Single Family Housing Guaranteed Loan Program?

The USDA Single Family Housing Guaranteed Loan Program is a federal program that provides loan guarantees to approved lenders who offer loans to eligible rural homebuyers. The program is administered by the Rural Housing Service (RHS), which is part of the U.S. Department of Agriculture (USDA). 

How does it work?

The USDA Single Family Housing Guaranteed Loan Program works by guaranteeing up to 90% of the loan amount in case of default by the borrower. This reduces the risk for lenders and allows them to offer 100% financing (no down payment required) and favorable terms (30-year fixed rates) to eligible borrowers. 

Who can apply for this program?

To apply for this program, you need to find an approved lender who participates in it. You will also need to meet certain eligibility criteria such as having a steady income that does not exceed 115% of AMI for your area; agreeing to occupy the property as your primary residence; being a U.S. citizen, U.S. non-citizen national or qualified alien; having a credit history that indicates a reasonable ability and willingness to repay debts; having an income that is sufficient to cover your monthly payments and other obligations.

What documents are required?

The documents required for the Section 502 Guaranteed Loan Program may vary depending on whether you are applying for a guaranteed loan or a direct loan. Guaranteed loans are subject to the credit and income requirements of both the lender and the USDA. Most lenders require at least a 640 score in order to use the USDA’s guaranteed underwriting system (GUS)1. Those applying for direct loans must demonstrate a satisfactory credit history and the ability to pay the USDA-set monthly mortgage payments1. (“USDA Guaranteed Home Loan vs the USDA Direct Loan – USDA Loans”) 
You must be a U.S. citizen, U.S. non-citizen national or qualified alien to be eligible for this program2. You must also meet income guideline caps that require your income to not exceed 115 percent of the median income in your area2. 
It is best to contact an approved lender or your local USDA Rural Development office for more information on specific document requirements. 

Conclusion 

The USDA Single Family Housing Guaranteed Loan Program is a great option for rural homebuyers who want to achieve homeownership with no money down and competitive interest rates. If you are interested in applying for this program, make sure you find an approved lender who participates in it and check if you meet the eligibility criteria. 

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