100% financing is allowed. Property must be owned and occupied by the borrowers as their principal residence. The Guarantee Fee of 3.5% (for purchase transactions) can be included in the financing.
No Mortgage Insurance
Closing Costs – Flexible Options
Closing costs, except for Discount Points, may be added to the loan when there is equity above the contract price as supported by the appraisal, OR
Seller contributions and gifts without any limitation are available to assist the borrower in paying closing costs.*
Borrower Eligibility
Income Limitations: In order to be eligible for a Rural Development guaranteed loan, the Borrowers’ adjusted household income cannot exceed the maximum allowable income limit for the state/county where the property is located – Income Limits (use moderate-income limits).
Asset Limitations: The borrower must not have sufficient assets to obtain traditional conventional financing with 20% down.
Flexible Credit Criteria: Applicants with credit scores of 620 or greater are typically not required to explain recent credit inquiries or to document adverse credit history except for those involving delinquent Federal debt or a previous Agency loan. Additionally, existing collection accounts may remain outstanding
and rental verifications are typically not required for applicants with credit scores of 620 or greater.
Property Eligibility
In order for a property to be eligible for a Rural Development guaranteed loan, the property must be located in a rural designated area. You may view eligible areas on USDA Rural Development’s web-site –
Property must be a non-farm, non-income providing tract. Generally, the value of the site (land value) must not exceed 30 percent of the total value of the property.**
When Repairs Are Needed
Existing properties must meet the current minimum property standards of HUD. However, when repairs are required for structural or mechanical deficiencies that exceed the Seller's contractual obligation, the lender can assist borrowers if the appraised value allows. The lender can finance required improvements based on an "as improved" appraised value, in combination with an escrow hold-back at closing.
* If seller contributions exceed 6% of the sales price, the appraiser must comment with respect to the impact to value.
** When the value of the site is typical for the area, as evidenced by the appraisal, and the site cannot be subdivided into two or more sites, the 30 percent limitation may be exceeded.