As a new home buyer, it’s a confusing process to research what types of loans are available and will work for you. I am a veteran living in Carson City Nevada after being told that with my current income I would qualify for about $187,000 using my VA loan, which is $70,000 less than the amount needed to buy a home. Fortunately, I came across a government funded loan that I qualified for $287,000. This loan does not include a down payment or mortgage insurance, in addition, depending on income, it can offer a subsidy in the monthly payment. The loan made it possible to buy a house in rural Nevada. In general, the income limit is $55,000 for a family of four.
The USDA RD 502 Direct Loan is a federally funded loan and the process is difficult at first. To help you understand, I recommend that you contact your state’s office for help with the application process. When you call for help, ask for the Single Housing representative.
The loan promotes rural areas generally with a population of less than 35,000, to help determine property eligibility and determine the eligibility loan amount.
According to the USDA RD, in general, to qualify you will need to demonstrate your ability to repay the loan and have a qualifying income based on the area in which you would like to live and,
- Not being able to obtain a loan from other sources on terms and conditions that can reasonably be expected to be met
- Agree to occupy the property as your primary residence
- Have the legal capacity to contract a loan obligation
- Meet the citizenship or eligible non-citizen requirements
- Not be suspended or excluded from participation in federal programs.
(Taylors, 2019)
The main features of the direct 502 loan are no down payment in most circumstances and no mortgage insurance. Another great feature is that the federal government will help you make your monthly payment, which will allow you to qualify for a higher loan amount. However, the subsidy has a repayment feature if you sell your home or no longer use it as your primary residence.
One last note: the loan process can take up to 120 days from start to finish, please contact the USDA RD office in your area for more up-to-date details.
Resources
Taylor, J. (2019, December 15). Direct Loans for Single Family Homes. Retrieved from usda.gov/programs-services/single family housing direct home connections/nv.