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What is a USDA Loan?

Check out our latest financial post about USDA home loans! Learn about USDA loan requirements and how they work.

When purchasing your dream home, it is helpful to know 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 situation. For many people living in or moving to small towns and rural areas, a loan guaranteed by the United States Department of Agriculture (USDA), which is often called a USDA loan, is an option to consider.

USDA loans, sometimes called rural development loans, are for qualifying low-to-moderate income borrowers in rural areas.¹ 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.²

Benefits of a USDA Loan

For those who qualify, the USDA guaranteed loan program can be an affordable financing option. USDA loans can offer zero down payment options, but there are upfront fees and ongoing mortgage insurance premiums.¹

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: ³

  • Meet state’s income-eligibility
  • Purchase property in a rural area 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, investment properties are not eligible
  • Have the legal capacity to incur loan obligation
  • Demonstrate willingness to meet credit obligations in a timely manner

The USDA provides on online resource for checking income and property eligibility for a USDA loan

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 transaction, 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. The USDA supplies a partial list of USDA-approved lenders online, but you can also 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 they’ll be able to answer all your financing questions.

1 “Special Loan Programs.” Consumer Financial Protection Bureau. Accessed July 3, 2018.

² “Mission & History.” United States Department of Agriculture Rural Development. Accessed July 3, 2018.

3 “Single Family Housing Guaranteed Loan Program.” United States Department of Agriculture Rural Development. Accessed July 3, 2018.

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