Qualifying for a RD Loan
(Rural Development) loans are zero down payment loans for rural areas guaranteed by the US Department of Agriculture. The loans are designed to make rural homeownership easier for first time buyers. They require good credit, income and employment history. This program has household income limits and properties must be in a RD designated area. Maps of areas designated as rural are available at United States Department of Agriculture Rural Development.
In terms of qualifying for the loan, there are four areas to consider:
Credit
Credit history must be good. Minimum score for RD is 640.
Income
Borrowers must have a stable source of income. 24 month employment and/or college history is needed. Some exceptions do apply. Although programs may vary, generally the total debt, including the new house payment, should not exceed 41% of gross (pre-tax) income. Note: RD uses "household income" not just borrower income to determine if income limits are within the program requirements. Income Limits
Reserves
Reserves are a liquid source of cash that a borrower can tap into after closing in case of a hardship to help make their mortgage payments. Although reserves are not always required, sometimes having reserves can help a borrower qualify. The most common forms of reserves are IRA or 401K.
Collateral
The home being purchased will be appraised to determine fair market value. If the appraiser states in the report that there is a health and safety concern, then a contractor's inspection or repairs may be needed. A home that is not in good condition may not be eligible for RD financing.
Legal Disclosure*: 30 year fixed rate RD loan-Interest rate 6.375% APR is 6.92%. Loan amount of $252,525 with no points and no junk fees. Includes upfront RD fee of 1% and monthly RD fee at 0.35% of loan amount. Monthly principal and interest payment is $1,575.43 plus monthly RD fee of $74 and you will also pay 1/12 of property taxes and homeowners insurance with the monthly payment. Assumes 100% loan to value (0% down payment). (As of 01/09/2024. Rates subject to change.)
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Message us if you have additional questions, would like to get Pre-Qualified, or would like a quote. Let First Equity be your guide through the loan process.