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.

7c78e6db 9e31 43bc 84c7 a4f54652a28a debf9afd d344 4de8 8398 b9505b7d1d7d 945267fe 876e 44c6 bf02 144cc1cd72b6 c3c033ed 8fca 46a8 827e 8ad8a72e302a be3ede10 85ac 4a06 95c6 bd277268bd9c 17b39c97 b876 4bfa bf41 40f0bd7faaf8 d3190378 c3e5 4f4f a4d5 ca148ec47767 debfa87f 262a 4342 b97b 2439f085384c 8b6e4d1d c1e4 443f 8802 4f2ba5710911 db18d8d5 25f5 4506 99da 83e21bfd6a08 ed5857ba c973 4b74 ba7c dec4d13a0f58 1d0377e3 2b5c 4a20 91a2 9afd1e058783 d8434263 38fa 4669 a329 943b8f7d19c5 55e97b3b 708c 4ff1 928c 24b46f58c774 3b8af53f e05d 47ec 9b24 4144d3226274 7136a545 1a19 4daa 80a9 7b0f6873717d dc3bf611 2826 40f3 8f7b 3fd702550929 eee29fd0 1be9 43a7 a4ca a08da5e41709 a88f0ad3 9350 4276 9681 761f1233bc5a 49a3c38b 7d40 4ca0 a4e3 6d75e8959bf7 12645743 653f 4e0d aed1 36a6a27c23c1 514d5ba4 85cc 43df 8672 1d60a1bda859 e2cd7e52 11b8 42b7 8c40 1a1c32ccfa01