The United States Department of Agriculture (USDA) Rural Development creates opportunities for families in rural areas to own safe and sanitary homes through housing assistance programs. The USDA guarantees home loans made by local lenders and offers financial assistance directly to borrowers. At Mortgage Team 1, Inc, we offer both guaranteed and direct USDA loans to Mobile residents.
There are two primary housing assistance programs available through the USDA. The first is the USDA Single Family Housing Guaranteed Loan Program which is designed to make homeownership easier for low and moderate-income families. These loans are offered by approved lenders and insured by the USDA. USDA Single Family Housing Direct Home Loans on the other hand are tailored to low and very-low income households and are offered directly by the USDA in the form of a subsidy.
USDA Rural Development Single Family Housing Guaranteed Loan Program
Families are able to purchase homes with zero money down, very low interest rates, and can finance closing costs when taking advantage of USDA Guaranteed Loans. To be eligible for the USDA Guaranteed Loan Program, borrowers must meet a few requirements.
- Household income must be less than or equal to 115 percent of the median income for the area.
- The home must be used as the borrower’s primary residence.
- The home must be in an eligible Rural Development area.
- Borrowers must have an acceptable credit history and be able to afford mortgage payments, taxes, and mortgage insurance.
Mortgage insurance is required with every USDA Guaranteed Loan. Each loan will have two different premiums. The first is an upfront premium of 1% of the purchase price. This is generally added to the loan balance. The second is an annual premium which equals .35% of the annual mortgage balance. This premium is paid monthly as part of your mortgage payment.
USDA Rural Development Single Family Housing Direct Home Loans
The USDA Direct Loan Program is a loan offered by the USDA directly to low and very-low income families. This program is commonly referred to as the Section 502 Direct Loan Program. Direct loans are designed to help families that are without safe and sanitary housing. Low income is defined by the USDA as being between 50 and 80 percent of the area median income (AMI). Very-low income is classified as below 50% of the AMI. As with guaranteed loans, certain requirements will need to be met in order to be eligible for the program.
- Applicants must be without safe and sanitary housing.
- Applicants must be unable to obtain a loan from other sources and must meet specific income requirements.
- The home must be the borrower’s primary residence and be located in an eligible Rural Development area.
- The home must be 2,000 square feet or less, not have a market value in excess of the applicable area loan limit, and not have an in-ground pool.
USDA Rural Development loans are a valuable home financing option for low and moderate-income families throughout Alabama. At Mortgage Team 1, Inc, our goal is to make homeownership a reality for all families throughout Mobile. Contact at any time, even after hours, for more information on Mobile USDA loans. Feel free to stop by our local Mobile office as well to work with our team face-to-face!