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USDA Mortgage

The rural development loan program of the United States Department of Agriculture (USDA) enables a low- and moderate-income household or applicant to receive a rural development mortgage to purchase a home. There are two types of USDA mortgage programs. One is for Direct Housing Loans and the other is for Guaranteed Housing Loans. Both of these USDA rural housing programs were created to promote homeownership opportunities and to improve the quality of life in underserved rural communities.

These rural housing loan programs offer the best of terms among government-sponsored loan programs, including 100% financing, meaning no down payment, and no mortgage insurance. The cost of mortgages would typically amount to the average cost of paying rent within the rural community.

To qualify for the Direct Housing Loan, or Section 502 Loan, applicants must have low incomes, incomes between 50 and 80 percent of median income (AMI); or very low incomes, incomes below 50 percent of AMI. Families must be without adequate housing and show that they are able to pay at least 24 percent of their income as mortgage. The loan terms extend through 33 years. Terms may be extended to 38 years for families with incomes below 60 percent of AMI and who cannot afford the 33-year terms. Each state may have more specific requirements, but, in general, the federal government specifies that applicants must have reasonable credit histories and have shown that they could not get loans from any other source.

Section 502 rural development housing must meet certain standards. The rural housing standard must reflect modesty in terms of cost, size, and design. Manufactured rural housing must also meet certain safety, thermal, and site standards, and be permanently installed.

The Guaranteed Housing Loan program enables individuals or families to participate in the rural housing development program whose income may be up to 115% of the medium income for the area. Applicants must have credit histories that are reasonable, and families must be without adequate housing. The terms for the guaranteed rural development home loans are for 30 years and the rural housing standards must be similar to those discussed under the direct housing loans.

There are other specific loans under the Direct Loan portion of the USDA rural housing program, essentially qualifying as mortgages, which enable very low- and low-income borrowers and households to construct their own homes, repair, renovate or modernize them.

State governments help oversee and integrate the USDA rural housing program with specifications that may be required for their particular regions. These specifications are listed via links on the USDA Web site.

To get a good idea of the terms and rates offered by the USDA rural development mortgage programs, one should compare them with others nationwide. This can be done by using the form provided here at For qualifying individuals, the Federal program would probably appear the most attractive. Attention should always be given to news releases on the USDA site to keep abreast of available funding for the rural housing program.

National Rate Averages

Mortgage Rates

Product Rate
5/1 yr ARM 3.147%
1 yr ARM 3.299%
15 yr fixed 3.221%
30 yr fixed 3.815%

Home Equity Rates

* Updated Jun 7, 2012