If you are looking to purchase a new home, you may be eligible for a unique mortgage opportunity from the U.S. Department of Agriculture (USDA). A USDA, or rural development loan, is designed to promote home ownership in non-metro areas. In fact, you could qualify for 100% financing. The goal of these loans is to establish stable communities that generate economic development in specific geographic areas through homeownership. However, to be eligible for this type of mortgage, you don’t need to find a property in the middle of nowhere. 97% of the land mass in the United States is eligible for USDA financing, most of these properties are just outside of metropolitan city limits. Here is everything you need to know about USDA or rural development home loans.

A USDA home loan goes by many names.

• Rural Development (RD) Loan
• Section 102 Loan
• Single Family Housing Guaranteed Loan Program

This type of home loan offers 100% financing which can be ideal for moderate income buyers. With no required down payment, you can have the ability to purchase sooner. This type of loan is designated for specific areas around and outside of a metro area, but many areas qualify.

Because this type of mortgage is backed by the USDA, lenders typically do not require a down payment. This is a great benefit of the USDA loan, however, you will still need to pay closing costs.

Typically, no more than 41% of your income should be allocated to future home payments and other outstanding debt. This debt to income ratio may be increased based on higher credit scores. However, it is important to note that if your household income exceeds 115% of the median income in the area of your home, you will be ineligible for a USDA loan.

In order for a property to eligible for a USDA backed mortgage, it must be in a solid, livable condition with no major defects. Most lenders offer this type of loan in suburban and rural areas. There is no requirement to be a first-time homebuyer, as long as you do not currently own adequate housing within a reasonable distance of the home you are attempting to purchase.

While mortgage rates are low in the United States currently, USDA rates tend to trend lower than the average conventional mortgage rate.