The USDA Mortgage Program provides fully funded home and property loans to qualified borrowers in rural areas. Eligibility is based on income, location, and other criteria, and the program was originally created to encourage agricultural expansion. It is considered one of the safest and most reasonable home loan programs in the US.
The United States Department of Agriculture (USDA) is a branch of the United States government that focuses on improving rural conditions, supporting rural and agricultural development, and managing natural resources. Rural Development is a major program within the USDA and includes a large program that provides fully funded home and property loans to qualified borrowers. A USDA mortgage can be an excellent choice for an individual or family planning to purchase rural property. While accessing a USDA mortgage depends on qualifying circumstances, it is generally considered one of the safest and most reasonable home loan programs in the United States.
Originally, the USDA Mortgage Program was developed primarily to encourage agricultural expansion. Agriculture has long been a major component of both the infrastructure and economy in the United States, and the creation of home and property loan programs helped create incentives to farm. The Federal Farm Loan Act of 1916 helped create the first USDA loans, which farmers could use for both property purchases and supplies. Subsequent legislation helped expand USDA’s mortgage programs to other qualified borrowers, to finance land and home purchases, and even cover the cost of some repairs and expansions.
Income is a primary factor in determining eligibility for a USDA mortgage. In general, income should be considered low or very low, but the exact limits are determined by the median income where you live. Borrowers with eligible income may be able to obtain a fully funded mortgage, but must provide proof that they will be able to make mortgage payments based on their existing income. Mortgage payments are often quite low, thanks to a generally low fixed interest rate and a 30-year loan term.
Another important requirement for a USDA mortgage is the location of the property. To qualify, the purchased property must be located within an area designated by the USDA as “rural.” A list of state designated areas is available on the USDA website; borrowers can also contact the local rural housing development office. Some counties may have a mix of eligible and ineligible areas, making it very important to be sure a property is within a qualifying boundary.
Other criteria can also affect your eligibility for a USDA mortgage. In general, the borrower must intend to use the property as a primary residence; it cannot be purchased to rent to others or occupy only part-time. In some cases, the borrower must prove that they do not own existing property that would serve as suitable housing for the family. While credit requirements aren’t as stringent as with many other home loan programs, borrowers still need to show a relatively decent credit rating to qualify.
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