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Rural Housing Guaranteed Loans

Some lenders have the capability of originating loans through the Department of Agriculture’s Rural Housing program. Even though this loan is administered by the Department of Agriculture, it is not intended to help people buy farms. The loan exists to assist low and moderate income buyers purchase homes in rural areas. 

Many areas that appear “built up” are still classified as rural. By using this program it is possible to purchase a home with little or no cash investment. Although it is income restricted, the income limits are very liberal.

Cash investment needed to buy a home - If a contract to purchase is structured correctly; it is possible to buy a home with as little as $500

Maximum Mortgage Limit - Set geographically based on HUD limits

First Time Home Buyer Requirements - You do NOT have to be a first time homebuyer to take advantage of this loan. You can be a move up buyer, as long as you intend on selling your present home.

Down Payment - A down payment is not required. Potential homeowners can apply for a loan up to the appraised value of a home, which means, if a house appraises higher then the purchased price, closing costs can be financed into the mortgage. Literally, the house can be purchased without the home buyer contributing any money into the transaction.

Eligible Properties - most single family housing types are eligible for financing, assuming they fall in an area that is designated as rural. This includes new and existing condos, new construction modular homes, Senior Citizen Homes, and existing and new construction single family houses. 

Rural Areas - Before looking for a home, speak to a mortgage representative that is familiar with the program. He can guide you as to what areas in your county are eligible. This is very important. The last thing that you would want to do is locate your dream home, and the find out that it is located in an ineligible area. You can also go to The Dept of Agriculture’s Rural Housing web site, which has the ability to search eligibility by property address. (link)

Income restrictions - There are income restrictions for this program. However the income limits are very liberal. They are based on 115% of the median income of the county that you are purchasing in, based on family size. All household income needs to be included in this figure. 
See chart (rural housing link)

Credit Requirements - If an applicant has credit scores of 620 or higher the credit history is usually automatically accepted. Collection accounts and charge off would not be required to be paid off. For borrowers with credit scores below 620, but above 580, the credit is usually acceptable, assuming a clean payment history for the past 12 months. It is difficult to get a borrower with scores below 580 approved, and their must be extenuating circumstances for the credit issues