USDA Loans

USDA Housing Assistance – USDA Loans

USDA (United States Department of Agriculture) provides many services to rural communities.  They offer assistance with USDA Loans, cooperatives, grants and  insurance programs and telecommunications programs. The reach of USDA is broad and does not end there, here is only a partial list of services they offer.

  • Animal Health
  • Biotechnology
  • Climate solutions
  • Disaster and Emergency Preparedness
  • Employee Services
  • Energy
  • Environment and Natural Resources
  • Food and Nutrition
  • Forestry
  • Housing Assistance
  • Plant Research
  • Rural Opportunities

USDA Loan Programs

USDA not only offers assistance in farming and agriculture but they also afford homeownership opportunities to low- and moderate-income rural Americans, provided through several loan programs, grants or loan guarantee programs.  Individuals are provided funding for improvements necessary to make their homes safe and sanitary. Besides Loan programs they also provide affordable multi-family rental housing for very low, low and moderate income families and to the elderly or persons with disabilities.  The services USDA provides could very well be one of the most successful government entities for providing American families hope and home ownership opportunities.  USDA offers Housing Assistance in a variety of programs such as Single Family Housing Direct Home Loans, Single Family Housing Guaranteed Loan Program or Multi-Family Rental Assistance.

USDA Direct Loan Program

One of the the USDA programs is the  direct loan programs is known as the Section 502 Direct Loan, this program assist applicants obtain decent, safe and sanitary housing for low- and very low income applicants.  The program provides payment assistance, which a type of subsidy that reduces the mortgage payment for a short time.   The amount of payment assistance is determined by a families adjusted income.  Many factors are considered for an applicant’s eligibility for this program. At minimum applicants must have an adjusted income that is at or below the applicable low income limit for the area where they wish to buy a house.  The applicant must demonstrate a willingness and ability to repay the debt.

Applicants requirements:

  • Be without decent, safe and sanitary housing
  • Be 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 your primary residence
  • Have the legal capacity to incur a loan obligation
  • Meet citizenship or eligible noncitizen requirements
  • Not be suspended or debarred from participation in federal programs

Properties financed:

  • Generally be 2,000 square feet or less
  • Not have market value in excess of the applicable area loan limit
  • Not have in-ground swimming pools
  • Not be designed for income producing activities

Borrowers are required to repay all or a portion of the payment subsidy received over the life of the loan when the title to the property transfers or the borrower is no longer living in the dwelling.

An applicant income eligibility can be determined by visiting USDA Income and Property Eligibility website :(

Generally an eligible area is a rural area within the United States with a population of less than 35,000.

Single Family Housing Guaranteed Loan Program

This USDA Loan program is a huge benefit for borrowers.  The program allows USDA approved lenders to provide loans for adequate, modest, decent and safe and sanitary dwellings for their primary residence.  The program provides a 90% loan guarantee to approved lenders and this benefits the applicant/borrower because a USDA Guaranteed Loan allows the lender to provide 100% loans to eligible rural homebuyers.  Homebuyer who qualify for USDA may build, rehabilitate, improve or relocate a dwelling in an eligible rural area.

What must I do to qualify?
Applicants must:

  • Meet income-eligibility
  • Agree to personally occupy the dwelling as their primary residence
  • Be a U.S. Citizen, U.S. non-citizen national or Qualified Alien
  • Have the legal capacity to incur the loan obligation
  • Have not been suspended or debarred from participation in federal programs
  • Demonstrate the willingness to meet credit obligations in a timely manner
  • Purchase a property that meets all program criteria

A property must be an eligible address to qualify.  All property addresses can be checked by either contacting USDA or from their website eligible addresses for loan guarantees.   Loan funds backed by USDA loan guarantees can be used for:

  • New or existing residential property to be used as a permanent residence.  Closing cost and reasonable/customary expenses associated with the purchase may be included in the transaction
  • A site with a new or existing dwelling
  • Repairs and rehabilitation when associated with the purchase of an existing dwelling
  • Refinancing of eligible loans
  • Special design features or permanently installed equipment to accommodate a household member who has a physical disability
  • Reasonable and customary connection fees, assessments or the pro rata installment cost for utilities such as water, sewer, electricity and gas for which the buyer is liable
  • A pro rata share of real estate taxes that is due and payable on the property at the time of loan closing.  Funds can be allowed for the establishment of escrow accounts for real estate taxes and/or hazard and flood insurance premiums
  • Essential household equipment such as wall-to-wall carpeting, ovens, ranges, refrigerators, washers, dryers, heating and cooling equipment as long as the equipment is conveyed with the dwelling
  • Purchasing and installing measures to promote energy efficiency (e.g. insulation, double-paned glass and solar panels)
  • Installing fixed broadband service to the household as long as the equipment is conveyed with the dwelling
  • Site preparation costs, including grading, foundation plantings, seeding or sod installation, trees, walks, fences and driveways

I want to get started, where do I begin?

The Larry Stepp Team at Gustan Cho Associates is always willing to assist.  A applicant must contact an approved lender.  Our Team can provide you assistance and direct you to a professional Realtor at no cost if you have not already developed a Realtor relationship to assist and guide you through the process.  To this point there are some great benefits to the USDA guaranteed loan program such as 100% financing with a FICO score of 640 or better and the applicant meets the guidelines stated above.   A detailed handbook HB-1-3555 is available to view online and can be printed.  This program is a wonderful program and helps lenders help American families with low and moderate income become American Homeowners and their dream a reality. The USDA promotes prosperity and fulfills communities need to prosper, improving the quality of life in rural areas.

The Larry Stepp Team at Gustan Cho Associates is available 7 days a week, holidays and weekends.

Larry Stepp     407-922-4755