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If you'd rather own a home that's in a small community than pavement and skyscrapers, the United States Department of Agriculture may be able to provide financial assistance with your purchase. The USDA Rural Development Guaranteed Housing Loan Program is a little-known tool for homebuyers that's designed to “improve the economy and quality of life in rural America.” You may think that a low-interest, zero-down loan would be difficult to obtain, but that's not necessarily the case. 

Types of USDA Programs

There are three distinct types of USDA loan programs for rural borrowers: 

  • Loan guarantees: Much like a FHA loan, this is when the government financially backs a loan issued by a local institution, like Carthage Savings and Loan Association, so that they can offer a zero-down mortgage with a low interest rate.
  • Direct loans: This loan is directly funded by the USDA and are usually reserved for very low income buyers. Interest rates on a direct mortgage can be as low as 1%.

Who Qualifies for USDA Rural Housing Loans?

The USDA home loan program is limited to properties occupied by the owner, and income limits vary by household size and location. You can get more detail by visiting the Income Limit Table for the program. Borrowers must also:

  • Be U.S. citizens
  • Make monthly payments that are 29% or less of income. Other debt payment must not exceed 41%
  • Have proof of dependable income for at least 2 years
  • Have an acceptable recent credit history. That means no accounts going to collections within the last 12 months

The USDA home loan process is a bit faster and easier for applicants with a credit score above 620. For borrowers with scores below 580, more strict underwriting standards will apply. Mortgages are given first to those in need, including people who don't have safe or sanitary housing, are unable to secure loans from other sources, and who have an income below the very-low limit for the area.

Which Homes Are Eligible? 

Direct loans issued by the USDA home loan program are usually limited to properties less than 1,800 square feet located outside of metropolitan areas. The homes need to have a market value below the area limit, but this amount varies widely from area to area. The average loan amount is about $217,000. 

You can learn more about USDA Rural Housing Loans from a professional by visiting or contacting Carthage Savings and Loan Association. Our mortgage experts can help you find the right mortgage option for your needs.