Rural Housing Loan

What Is a Rural Housing Loan?

A rural housing loan, also known as a USDA loan, is backed by the U.S. Department of Agriculture and is designed to encourage homeownership in America’s more rural and remote locations. They’re ideal for low- and middle-income earners who may have difficulty obtaining other forms of financing.

Rural Housing Loan Qualifications

Rural housing loans can only be used for owner-occupied, primary residences, so they cannot be used on rental or commercial properties. You’ll also need to buy a home in an eligible location and meet certain debt-to-income and employment requirements.

Who Should Get a Rural Housing Loan?

USDA loans are designed for buyers with low to moderate income. They’re also ideal if you:

  • Are willing to live outside a major metropolitan area
  • Need low up-front costs at closing
  • Are having a hard time securing funding through other means
Pros and Cons of Rural Housing Loans
  • No down payment
  • No prepayment penalties
  • No limit on cash contributions
  • 100 percent financing
  • Limited to certain geographic areas
  • Requires private mortgage insurance
  • Some income limits may exist
  • Limited to owner-occupied homes only