The Basics of Rural Development Loans

You might be surprised to learn that VA loans aren’t the only loan programs out there that don’t require a down payment.

While 100%-financed VA loans are only available to Veterans and their eligible spouses – there’s another popular zero-money-down loan that’s open to all qualified borrowers.

It’s a program that’s used regularly for home purchase financing and refinancing in suburban and rural areas around the U.S. – including in our markets of Metro New Orleans, Austin, Destin, and Tampa.

It’s the U.S. Department of Agriculture (USDA) Rural Development Loan program and it’s one of the most beneficial home loan programs you might qualify for if you live in an eligible location.

Read on to learn the benefits of rural development loans and get additional resources to help you determine if this type of loan is right for you.

Why Use a USDA Rural Development Loan?

Aside from offering 100% financing to qualified borrowers, there’s a flurry of additional advantages to using an RD loan, including:

  • Lower interest rates than conventional mortgage rates
  • Closing costs may be rolled into your loan
  • Lower monthly Mortgage Insurance fees

Learn more of the benefits of USDA RD loans.

How Do You Know a Property is Eligible for a USDA RD Loan?

Connecting with your Gulf Coast Bank Home Loans loan officer is the first step to take if you’re interested in finding out whether or not a rural development loan is an option for you. Your loan officer can help you determine your eligibility and get you pre-qualified to purchase a home.

The next step is ensuring that a property you are interested in purchasing is located in an eligible area. You can use the USDA’s property eligibility tool  to do this by entering the address(es) of any properties you’re interested in purchasing.

It’s a good idea to keep in mind that the USDA’s definition of “rural” is a broad one. It’s defined as any area with a population of less than 35,000 people. This technically means 97% of the U.S. may qualify.

In Metro New Orleans, this includes areas on the West Bank, on the Northshore, and in Tangipahoa Parish. Outside of Baton Rouge, properties in Denham Springs and around Livingston Parish may qualify. And there are certain areas outside of Austin, Destin, and the Tampa suburbs that may qualify.

Your loan officer can also help you verify a property’s location eligibility.

Additional Eligibility Requirements for USDA Loans

Location isn’t the only factor considered when determining eligibility for a rural development loan.

Others include:

  • Property must be used as a primary residence
  • Investment properties and second homes are not eligible
  • Property cannot be an income-producing farm
  • There must be access to the home from a street, road, or driveway
  • There must be adequate utilities, water, and a wastewater disposal system servicing the home
  • The home’s foundation must be structurally sound

When it comes to borrower income, your income cannot exceed the limit set by the USDA. This limit is determined by the location of the property and the number of people who will live in the home. You must also have a debt-to-income ratio that meets USDA requirements.

The USDA has an income eligibility tool that is helpful in determining if your income qualifies. It’s best to also reach out to a loan officer to discuss your financial situation and eligibility in detail.

Let’s Discuss Whether Rural Development Loans Could Be an Option for You!

The most ideal way to determine your income and property eligibility for a USDA rural development loan is to connect with a loan officer in your area. Our loan officers are here to help you find best-fit home loans for your financial needs.

We’re the bank that cares about you and we’re here to help you achieve your homeownership dreams!