When you’re purchasing your dream home, it is helpful to know about the different types of loans available to you. From conventional mortgages to government sponsored home loan programs, there are many options, so it is a good idea to talk to your lender about which loan program is best for your specific situation. For many people in small towns and rural areas, a loan guaranteed by the United States Department of Agriculture, often called a USDA loan, is an option to consider.

Key Takeaways

• USDA loans help make homes affordable for lower to moderate income borrowers and help improve rural communities
• USDA loans don’t require a down payment, and they have flexible credit score requirements, lower fixed interest rates and include closing costs in the loan.
• Qualifying for a USDA loan varies by state, but some of the requirements usually include income eligibility, purchasing a home in a USDA-defined rural area and occupying the home as a primary residence.
• Borrowers must choose a USDA-approved lender, and that lender will manage the application and approval process.

USDA loans, sometimes called rural development loans, are for qualifying low-to-moderate income borrowers in rural areas. The program is intended to help improve the economy and quality of life in rural America by providing financing opportunities for affordable housing, including manufactured homes.

Benefits of a USDA Loan

For those who qualify, the USDA guaranteed loan program can be an affordable financing option. USDA loans can offer benefits such as zero percent down payment options, flexible credit requirements, typically lower fixed interest rates and the ability to include closing costs in financing. However, upfront and annual guarantee fees as well as ongoing mortgage insurance premiums could be included in the loan as well.

USDA Loan Requirements

When it comes to qualifying for a USDA loan, there are certain requirements that must be met, and these can vary state by state. It’s a good idea to check with your state’s local rural development office for more specifics. To be eligible for this type home financing, borrowers must:

• Meet the state’s income eligibility requirement
• Purchase property in a rural area, as defined by the USDA
• Be a U.S. citizen, U.S. non-citizen national or qualified alien
• Have not been suspended or debarred from participation in federal programs
• Be occupants of the home, as investment properties are not eligible
• Have the legal capacity to incur a loan obligation
• Demonstrate willingness to meet credit obligations in a timely manner

How Does a USDA Loan Work?

Getting a USDA loan is similar to getting a conventional mortgage or FHA loan because your chosen lender handles all of the transactions, from taking your application to issuing the final approval. In order to apply for this loan, you need to make sure that you select a lender that is already approved by the USDA to offer this special loan program. You can contact your state’s guaranteed loan coordinator for information about all of the approved lenders in your area.

Finding the right financing for your manufactured home is based on you and your circumstances, which is why it is good to ask a lender for quotes and compare the total costs. And remember, the choice of lender is always up to you! Choose a lender you feel comfortable with and who’s able to answer all your financing questions.

Want to learn more about different types of loans, budgeting, the home loan journey and more? Check out our Home Investment category on our Studio blog to find the answers to all your home financing questions.