How Does the USDA Rural Housing Guarantee Loan Program Work?

Home / Blog / How Does the USDA Rural Housing Guarantee Loan Program Work?

How Does the USDA Rural Housing Guarantee Loan Program Work?

The USDA Rural Housing Guaranteed Loan Program is an important option for low-to-moderate income individuals for obtaining financing for housing.

According to the USDA, the Rural Housing Guaranteed Loan Program, "assists approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas.”

Approved applicants may use the funding to build, rehabilitate, or relocate a dwelling in an approved rural area.

How Does the Program Work?

Despite its name, applicants don't receive funds from the USDA itself. Instead, the applicants receive loans from third-party lenders that are backed by the U.S. government.

Specifically, the USDA offers a  guarantee to approved lenders to reduce the risk of extending 100 percent loans to eligible buyers who reside in rural areas. 

What Are the Benefits?

The Rural Housing Guaranteed Loan Program offers several key benefits to eligible participants:

  • Loan access: The primary benefit of the USDA loan program is extending loan financing options to low to moderate-income individuals and families.
  • Lower interest rates: Backed by the USDA, lenders are generally comfortable offering recipients lower interest rates on loans. These rates are often lower than the standard rates for 30-year, fixed-rate mortgages.
  • No down payment: Qualified buyers can purchase a home with no down payment, significantly reducing the up-front costs required to own a home. This also means there is no private mortgage insurance (PMI) required—buyers will need to pay an upfront premium that is similar to PMI, but this typically costs less than PMI plans and can be financed into the loan itself.
  • No credit score requirement: The USDA loan program itself does not require applicants to meet credit score thresholds. However, many lenders will have their own credit score requirements that must be met before financing is offered.

Am I Eligible?

To receive this financial assistance, applicants must meet certain criteria:

  • U.S. citizenship, or status as a non-citizen national or Qualified Alien
  • Annual income must fall within certain limits
  • Purchased property must meet all program criteria
  • Agree to personally occupy the home as the primary residence
  • Show a legal capacity to incur the loan obligation
  • Have not been suspended from participation in federal programs
  • Demonstrate the willingness to meet credit obligations in a timely manner

For most people considering this loan, income eligibility will be the most significant criteria.

To qualify for the Guaranteed Loan Program, applicants can have an annual income of up to 115 percent of the median income for the area.

Cost of living and income rates vary widely in California; to see whether your income level qualifies for this program, you can find a full listing of state income limits on the USDA’s website.

Are you a California resident or just interested in learning more about low-interest housing loans? Übermortgage is here to help. Contact us today to discuss whether you may qualify for government-backed financing to support your dreams of home ownership.

70285a6e 1130 454e 9353 9bd7b9633970 2fc6fa04 e830 4067 b9f3 add8fa0e4b44 262dd059 a821 4ce1 ac37 725f0527fa60 c833f45e 01fe 439e 80c5 416ce0ce682e 5ddcacf5 1bf8 4fe5 af36 c719e5ce6618 97924053 152b 4b82 a0e0 f9ffca4759f1 4d43ae7c 4415 4d9e 82cd 4813437aaa4b 36d4176b be34 4052 a290 9bb52eb739e1 d7a723e4 3a9f 4c30 b084 9d9cb6d96a2d bb504b2f a3f5 4c90 98cd f9c337b4597e 2a06b8ef fb66 41e2 8ea4 29b4a87b74aa c38d8eb4 a0ad 43da a269 17472ee69552 facb7630 fc81 405e 9159 61725dd410b5 986e177d 2cc4 4981 a832 21ec32971fc9 012ce0c1 1be2 498d 8a31 d29e518c52df 24e130a8 c51d 4afc 83ec 4b73e1197b93 07499658 c8f1 4af4 ba28 ae5e205448ce d5a81258 651a 4cdb 9c8c 152b10d076e9 39e02f82 9534 4c0f a05c 00da1e91129a e47113b3 05a1 47ae aed0 5802826ce64e d9b746d1 9dfa 4a80 af45 706b1750f577 38295031 22d7 4e91 8251 357d1c9f973a 0cf9e040 a1fc 4679 9803 3bc49c97f974