Advantages of rural mortgages

A USDA home loan, also known as a rural mortgage or rural housing loan, is a home loan offered to property owners and guaranteed by the United States Department of Agriculture (USDA). USDA offers special financing opportunities to homebuyers residing in or interested in purchasing a primary residence within USDA-defined rural areas.

Despite common misconceptions, homebuyers don’t have to purchase a home in a remote area or on farmland to be eligible. The definition of rural may be much broader than you think. A wide range of non-metropolitan regions qualify, including many suburbs. If you’re unsure if the home you want to buy is in a rural area, check the USDA rural housing eligibility and requirements here.

If the home you’re interested in is in an eligible area, rural mortgages can unlock several benefits Check out these ten advantages of buying a home with a USDA rural development mortgage:

• 1. Easier entry to first-time homeownership

  One hundred percent financing of the purchase price means you can buy a home sooner and start building equity without waiting years to save for a larger down payment. Repeat homeowners may also qualify.

• 2. Competitive interest rates

  Depending on your financial situation and credit history, fixed-interest rates for USDA-guaranteed loans may be below Conventional loan rates, helping to reduce your long-term borrowing costs.

• 3. Flexible credit requirements

  A perfect credit score isn’t necessary when applying for a home loan. While other loan programs may require higher credit scores, you can qualify for a rural mortgage with a score as low as 540. However, if you have no credit score or credit history, your local Guild loan officer can still help you get on the path to homeownership.

  • a. Assistance for low and moderate income borrowers The USDA rural development mortgage program sets income limits based on an area’s median income, ensuring support goes to those who need it most.

• 4. Lower closing costs

  If you secure a loan from a USDA-approved lender like Guild Mortgage, and the property’s appraised value exceeds its purchase price, you may have the option to add your closing costs and other upfront fees to your loan balance. This lets you pay off these costs over time instead of upfront.

• 5. Flexible source of income

  USDA loans consider various income sources, making rural mortgages more inclusive for different financial situations. These sources can include wage and salary, self-employment earnings, retirement benefits, child support, alimony and certain public assistance income. Additionally, USDA also allows the use of gift funds for a down payment.

• 6. Large loan amounts

  Loans are based on your repayment ability, with loan amounts available up to $1,149,825.

• 7. Predictable payments

  With a fixed-rate versus an adjustable-rate mortgage, you can budget your finances over the long term because your monthly payments won’t change. You won’t have to worry about unexpected increases due to fluctuating interest rates.

• 8. Seller concessions allowed

  USDA loans allow for seller concessions of up to six percent of the sale price, which can be used to contribute towards your closing costs, making it easier for you to cover these expenses.

To be eligible for a rural mortgage, you must meet these requirements.

• Rural area location: Your new home must be located in an area defined by the USDA as rural. USDA considers a rural area as one consisting of open countryside with a population of no more than 35,000.
• Low-to-moderate income: Income eligibility depends on your location. Generally, USDA loan borrowers can’t earn more than 115 percent of the median income for the area where they plan to purchase a home.
• A reliable source of income: Borrowers must demonstrate stable and dependable income for repayment qualification. Minimum income history requirements depend on the income source.

• • Rural mortgages are not just for farmhouses. Other eligible properties may qualify, including: 1-unit single-family residences
  • Planned unit developments
  • Condominiums (must be approved)
  • Manufactured homes*

One key benefit of USDA rural mortgages is 100 percent financing, which means eligible applicants don’t need a down payment. You can finance the entire property value, which might be more than your home’s purchase price. If that’s the case, you may also be eligible to finance your loan’s closing costs.

Don’t let the term rural fool you. This type of loan is available in many suburban areas as well. Be sure to check your area’s eligibility status before getting too far into the homebuying process. Review the USDA property eligibility map to determine if the property you’re interested in is in an eligible area. Note that the USDA updates its list of eligible rural areas annually.

The U.S. Department of Agriculture recognized Guild Mortgage as a 2023 Top Guaranteed Rural Housing Lender in the Loan Origination category. Guild is the second largest originator of USDA loans nationally. In addition, Forbes Advisor and Business Insider consistently ranked us as one of the best USDA mortgage lenders.

“While these loans are designed to assist homebuyers in rural areas, the USDA considers most of the country, including some suburban areas, as qualified rural areas. Guild remains dedicated to homebuyers who live or would like to live in rural areas and beyond, working with each of our customers to find the best solution for them.”

— David Battany, EVP of capital markets

These are just a few of the many reasons to Connect with a loan officer to discuss your available mortgage options and find out if a rural mortgage is right for you.

Finding a loan officer who provides personalized service is essential when applying for a home loan. By understanding your financial considerations, offering mortgages tailored to your needs and guiding you through every stage of the process with transparency and expertise, a dedicated loan officer can help you achieve your homeownership goals.