Is a USDA Rural Loan The Right Option?
When we started considering our options for moving out of our current apartment and on to land to pursue our homestead dreams, we thought that we only had two options. We thought that our options were to buy with a traditional mortgage loan or buy with cash. It would take us quite a while to save a down payment for a traditional loan. Certainly, it would take us a short lifetime to save to pay in cash. The USDA Rural loan may be the option we are looking for.
Actually, I think that one of my best friends, whom I call AD, found the information about it first then sent it to me. The United States Department of Agriculture (USDA) offers a number of programs that provide financial assistance for an array of rural applications. My initial misconception was USDA only deals with farming. However, included in those programs are options to finance a single family home.
USDA RURAL LOAN
According to their website: “This program helps lenders work with low- and moderate-income households living in rural areas to make homeownership a reality. Providing affordable homeownership opportunities promotes prosperity, which in turn creates thriving communities and improves the quality of life in rural areas.”
USDA RURAL LOAN HIGHLIGHTS
- 100% Financing – As the lender explained to us, having a mortgage that is financed 100% does not mean that you will not need to bring any money to the table. You will likely still need to cover closing costs and prepaids. These can be anywhere from 2% – 5% of the purchase price.
- Closing cost – USDA loans allows for closing costs to be rolled in as part of the loan. It is also allowed for up to 6% of the closing costs to be covered by the sellers.
USDA RURAL LOAN ADDITIONAL CONSIDERATIONS
- Income restrictions based on size of family, state and county.
- Property must be within an USDA designated rural area. Find out what is considered rural in your area.
- Must adhere to credit and debt to income ratios standards.
IS A USDA RURAL LOAN THE RIGHT OPTION FOR OUR FAMILY?
The quick answer is – potentially. The benefits of the program speak to our current needs. We spoke to the lender a few months ago. One of the things he told us was “Unless you know someone that is generous enough to help you with a down payment, this is what you can do”. Now, I know people. None of these people meet his definition of generous though.
A number of homesteaders that we read or watch on YouTube advocate for a debt free start to homesteading. That’s awesome, I just do not feel that would be possible for us. We don’t have credit card debt, however, I do have a healthy amount of student loan debt. With that in mind, in order for us to continue to move toward achieving our goal to homestead, it is important for us to keep open minds, be creative and continue to seek out as much information as we can.
What do you think about the USDA Rural Loan? Do you think you’ll look into whether it’s right for your family?