USDA Rural Development Home Loan Program
The Rural Development Program, often referred to as RD, is a home loan program backed by the U.S. Department of Agriculture. The goal of the program is to help spur growth in more rural areas. Given the USDA’s mission with the program, there are a couple of unique requirements and restrictions to meet the qualifications of the program so let’s review those:
First, the property must be in an eligible area. The program is quite forgiving with area restrictions therefore the property doesn’t necessarily need to be “out in the middle of nowhere” to qualify, however, if you are looking in a major metropolitan area, this program simply won’t work. You can search property eligibility here at RDArea.com.
Second, borrowers must meet the guideline regarding household income limits. This restriction, so to speak, can seem confusing but, for the calculation, RD looks at all the income earned by members in the household to confirm the total is under a predetermined threshold. The threshold amounts vary from area to area. As an example, for 2021 in Kalamazoo County, Michigan, the income limit for a household with 1-4 people living in it is $91,900. That limit increases to $121,000 for households with 5+ family members. So, actually, many prospective home buyers will be under those limits. You can search for income limits in your area here. Now that we got that out of the way, let’s review the many benefits this loan program has to offer.
Pros of the USDA Rural Development Loan Program
- No Down Payment option
- Flexible credit and qualifying guidelines
- Up to 6% seller paid closing costs allowed
- Low 30 year fixed rates
- New Construction option available
- No pre-payment penalty
- Ability to finance renovations into the home with the RD Renovation Loan Program
