Buying a home in a rural area comes with its own unique set of challenges. With USDA Rural Development loans, the path to homeownership in small towns and rural communities across Arkansas just got a whole lot easier.
Rural Development loans, also known as USDA home loans, offer 100% financing to eligible homebuyers in qualifying rural locations across Arkansas. That means you can get into your dream home with $0 down!
Keep reading to learn everything you need to know about Arkansas Rural Development loans, including
- What is the Rural Development Loan Program?
- Benefits of Rural Development Loans
- Rural Development Loan Requirements
- How to Apply for a Rural Development Loan
- Rural Development Loan Rates
- FAQs about Rural Development Loans
What is the USDA Rural Development Loan Program?
The Rural Development loan program is an agency within the United States Department of Agriculture (USDA) that offers home loans to buyers in rural locations.
Established in 1949, the goal of the Rural Development loan program has always been increasing accessibility to credit in small towns and rural areas. Today, thousands of applicants per year use Rural Development loans to purchase homes across the country
Rural Development offers 2 main types of mortgages:
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Guaranteed Rural Housing Loans: With this loan, you work with an approved USDA lender and the Rural Development agency guarantees a portion of the loan.
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Direct Rural Housing Loans: With this option, you borrow directly from the USDA Rural Development agency.
No matter which loan you choose, Rural Development mortgages offer affordable financing options for eligible homebuyers in qualifying rural locations.
Benefits of Rural Development Loans
Some of the biggest benefits of Rural Development loans include:
100% Financing with $0 Down
The best part of Rural Development loans is the ability to finance 100% of your home purchase price and minimum closing costs. That means you can get into your dream home without a down payment or mortgage insurance.
Below Market Interest Rates
Interest rates on Rural Development loans are set by the government and are typically below market rates. That makes these loans more affordable for borrowers.
Low or No Private Mortgage Insurance
Since you can finance 100% of your loan amount, private mortgage insurance is not required on most Rural Development loans. That saves you hundreds per month.
Fixed Interest Rates
Rural Development loans come with fixed interest rates that will never change over the life of your loan. You get payment consistency and stability.
Long Repayment Terms
Rural Development mortgages come with repayment terms up to 38 years. That gives you more time to pay off your loan and lower monthly payments.
Low or No Origination Fees
You’ll pay lower upfront loan fees with a Rural Development loan, saving you money at closing.
Loan Amounts up to $647,200
Rural Development loans go up to $647,200 depending on your location, ensuring there’s plenty of financing for your dream home.
Low Credit Score Options
Credit scores as low as 640 may qualify for financing through the Rural Development loan program.
Rural Development Loan Requirements
To qualify for a Rural Development loan, you must meet certain eligibility requirements:
Location in an Eligible Rural Area
Your home must be located in a rural area as defined by the USDA Rural Development agency. You can check your address to confirm eligibility.
Meet Income Limits
Your income must be below the limit set by USDA for your area, typically 115% of the median income for that location.
Good Credit History
Most lenders require a minimum credit score of 640 for Rural Development loans, though requirements vary. You must have an acceptable credit history.
Sufficient Income to Repay
You must document stable income sufficient to make your mortgage payments long term.
Citizenship or Permanent Residency
At least one borrower must be a U.S. citizen or have permanent resident alien status.
Property Must Meet Requirements
The home you purchase must meet Rural Development requirements including being modest in size, design, and cost for the area.
Home Must Be Primary Residence
You must occupy the home as your primary residence – investment properties or secondary homes do not qualify.
First Time Home Buyer Requirement
If your income exceeds area limits, you must be a first time home buyer, defined as someone who hasn’t owned a home in the past 3 years.
How to Apply for a Rural Development Loan
Follow these steps when applying for a Rural Development mortgage:
1. Check Your Eligibility
Confirm the home you want to buy is in an eligible rural location and your income is within limits using the RD Income and Property Eligibility tool.
2. Find a USDA Approved Lender
You can search for approved lenders by state who offer Rural Development loans. Many credit unions and community banks participate.
3. Choose a Loan Type
Decide if you want to apply for a guaranteed loan through a lender or a direct loan funded directly by Rural Development.
4. Compile Required Documents
Gather financial statements, tax returns, pay stubs, and other documents required for your loan application.
5. Complete the Application
Your lender will guide you through the application process. Be prepared to pay for a home appraisal and credit report.
6. Get Pre-approved
You’ll receive a pre-approval letter once your eligibility is confirmed. This allows you to make offers on homes.
7. Find Your New Home
Work with a real estate agent to find a home in your price range that meets Rural Development requirements.
8. Make an Offer
Make an offer once you find the perfect home! Remember Rural Development loans can finance 100% of the purchase price.
9. Close on Your New Home
Final loan approval comes a few weeks before closing. You’ll review final loan costs and sign documents. Then get the keys to your new home!
Current Rural Development Loan Rates
Rural Development loan rates are set by the government and fixed for the life of your loan. Here are current interest rates as of February 2023:
- 30 Year Fixed Rate Mortgage – 5.25%
- 20 Year Fixed Rate Mortgage – 5.25%
- 15 Year Fixed Rate Mortgage – 4.75%
Rates on Rural Development loans are typically below market averages, making financing more affordable.
Actual interest rates depend on your credit score, loan amount, debt-to-income ratio, and other factors. Be sure to get a pre-qualification to view personalized rates.
Frequently Asked Questions about Rural Development Loans
If you’re considering a Rural Development loan, you probably have questions. Here are answers to some of the most common FAQs:
What makes a property eligible for a Rural Development loan?
The home must be located in an eligible rural area as defined by the Rural Development housing program. The property, lot size, home design, and home value must all meet Rural Development guidelines too.
What is the maximum loan amount I can get?
The maximum loan amount depends on the type of Rural Development loan, your income, and the cost of homes in your county. Loan limits range from around $200,000 to over $600,000.
Can I use a Rural Development loan to refinance?
Yes, you can refinance an existing mortgage with a Rural Development loan in some cases to get better rates or terms. Cash-out refinancing is limited to 50% of the value of the home.
Does my credit score have to be perfect to qualify?
No. You can qualify for a Rural Development loan with a credit score as low as 640 in some cases. There is more flexibility than conventional loans.
How large of a home can I purchase with a Rural Development loan?
Rural Development loans limit the size of home you can purchase to between 1,000 and 2,000 square feet depending on your household size and other factors. Homes must be modest.
Can I use a Rural Development loan to buy land or build a home?
Yes, Rural development offers land loans to purchase a lot and construction loans to build a new home on that land. You cannot use one loan for both.
Are You Ready to Apply for an Arkansas Rural Development Loan?
If you’re ready to stop renting and buy a home in a rural Arkansas community, a Rural Development loan offers an affordable path to homeownership.
With no down payment required and 100% financing, you can purchase your dream home even with limited funds. And with interest rates below market averages, Rural Development loans provide below-market financing too.
To get started, use the Rural Development Income and Property Eligibility tool to check your status. Then connect with a USDA approved lender in Arkansas to pre-qualify and learn more about Rural Development loans.
Homeownership is possible thanks to the Rural Development mortgage program – over 43,000 families per year use these loans to buy their piece of the American dream. Now it’s your turn! With an Arkansas Rural Development loan, you can move into your
USDA Rural Development – Arkansas Office Create an Account Updated:05/2019
USDA Rural Development is committed to helping improve the economy and quality of life in rural America. Their programs are designed to help rural Americans in many ways.
They offer loans, grants and loan guarantees to help create jobs and support economic development and essential services such as housing, health care, first responder services and equipment, and water, electric and communications infrastructure.
They promote economic development by supporting loans to businesses through banks, credit unions and community-managed lending pools. We offer technical assistance and information to help agricultural producers and cooperatives get started and improve the effectiveness of their operations.
They provide technical assistance to help communities undertake community empowerment programs. We help rural residents buy or rent safe, affordable housing and make health and safety repairs to their homes.
REMINDER: This listing is a free service of ArkansasLandCAN. USDA Rural Development – Arkansas Office is not employed by or affiliated with the Arkansas Land Conservation Assistance Network, and the Network does not certify or guarantee their services. The reader must perform their own due diligence and use their own judgment in the selection of any professional.
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