Rural Development Loans in Florida: A Guide to USDA Financing for Homebuyers

Rural development loans from the USDA are an affordable mortgage option for low- to moderate-income homebuyers in less populated parts of Florida. With no down payment and low interest rates, a USDA loan can help make owning a home in rural Florida attainable.

In this comprehensive guide I’ll explain everything you need to know about getting a rural development loan in Florida including

• What is a USDA loan?
• USDA loan programs
• Benefits of USDA loans
• Eligibility and requirements
• How to apply
• Interest rates and terms
• Areas that qualify in Florida
• And more…

Whether you already live rurally or want to relocate outside the big city, a USDA-backed mortgage may be able to help you buy and finance a home. Keep reading to learn more about how rural development loans work and if you might qualify for one in Florida.

What is a USDA Loan?

USDA loans are government-backed mortgages aimed at promoting growth and development in America’s small towns and rural areas

These 0% down payment loans are issued by approved lenders and guaranteed by the United States Department of Agriculture (USDA) The USDA’s Rural Development division operates the Single Family Housing Guaranteed Loan Program to serve low- to moderate-income rural residents

In 2020, over 165,000 borrowers applied for USDA home loans, which shows it’s a viable mortgage option that more people may qualify for than they realize.

The USDA guarantees these affordable mortgages to reduce risk for lenders working with buyers who may not meet conventional underwriting standards. Guarantees encourage lenders to approve borrowers with lower credit scores and incomes at below-market interest rates.

USDA Loan Programs

The USDA Rural Development division offers several types of single-family housing loans and grants. Here are the main loan programs available to individuals and households in Florida:

Guaranteed Loan

The most common type of USDA loan is the guaranteed loan. This program provides borrowers with 100% financing to buy, build, repair, renovate or relocate a home in an eligible rural location.

Guaranteed loans help lenders work with low- to moderate-income buyers by guaranteeing 90% of the mortgage amount. This reduces risk for the lender.

Direct Loan

USDA Direct Loans are limited to applicants with very low incomes who are unable to secure reasonable loan terms elsewhere. Direct loans have a 1-4% interest rate and come directly from the USDA rather than a traditional lender.

Repair and Rehabilitation Loan

Also called a Section 504 Home Improvement loan, this program provides financing at a fixed 1% rate to low-income homeowners. Funds must be used to update, repair or remove hazards from an existing home.

Benefits of USDA Loans

USDA rural housing loans offer homebuyers in eligible areas some unique advantages compared to FHA, VA and conventional loans:

• No Down Payment Required – 100% financing means you can buy a home without any upfront costs for a down payment.

• Low Interest Rates – Interest rates on government-backed USDA loans may be below current market rates, as low as 1-2% for very low-income buyers.

• No Mortgage Insurance – You won’t have to pay monthly mortgage insurance premiums like required with conventional loans.

• Lower Minimum Credit Scores – Credit score requirements for USDA loans may be more lenient than other mortgages. Minimum scores around 640 are often acceptable.

• No Cash Reserves – You aren’t required to have months of mortgage payments saved up in order to qualify.

• Seller Credits Up to 6% – The seller can pay up to 6% of your closing costs and prepaids.

• 33-38 Year Terms – Extended loan terms keep monthly payments low and affordable.

For buyers who genuinely can’t afford a conventional mortgage, USDA financing provides a legitimate path to homeownership.

Am I Eligible for a USDA Loan in Florida?

To qualify for a USDA-backed mortgage in Florida, you must meet certain eligibility standards related to your income, residency location, citizenship status and credit.

Here are the basic requirements to receive a rural development loan in Florida:

• Income Limits – Your income must be below the limit for your area and household size. View income limits by county.

• Purchase a Rural Home – The home being purchased must be located in a designated rural zone. Check your address on the USDA eligibility site.

• Good Credit – Minimum credit scores around 640 are often acceptable, but standards vary by lender. Some past credit issues are allowed with explanation.

• Debt-to-Income Ratio – Your total monthly debt payments, including the new mortgage, should not exceed a certain percentage of your gross monthly income. Typically, a ratio below 45% is preferable.

• Citizenship – At least one borrower must be a U.S. citizen, U.S. non-citizen national or qualified alien.

• Primary Residence – You must make the home your primary residence and live there at least six months per year.

• Property Size – The home must be modest in size, value and design. Loan limits and square footage maximums apply.

• First-Time Homebuyer – You can’t own other residential property. Some exceptions apply.

Meeting the income limits for your family size is key. You can check if your income falls within the thresholds for Florida rural counties using the USDA income eligibility tool.

How Do I Apply for a USDA Home Loan in Florida?

To get a USDA-guaranteed loan, you apply through a USDA-approved lender. Start by contacting lenders in your area that offer USDA financing in Florida.

Many banks, credit unions and online lenders provide USDA loans. You can search for participating lenders on the USDA Lender List.

The lender will guide you through their application process. Be prepared to provide documents that verify your income, citizenship status, debts and assets.

Here’s an overview of applying for a USDA-guaranteed mortgage in Florida:

• Contact USDA-approved lenders
• Choose a lender and complete their application
• Submit required income and identity documents
• Allow the lender to verify your credit, assets, debts and eligibility
• Obtain a conditional commitment if approved
• Make an offer to purchase an eligible property
• Allow for appraisal, inspection and underwriting
• Provide updated documents as needed
• Close on your USDA mortgage in Florida!

For Direct Loans, the process involves applying directly through your local Rural Development office instead of a traditional lender.

What Are Current USDA Loan Rates and Terms?

USDA-guaranteed loans are fixed rate mortgages based on current market interest rates. As of March 2023, average 30-year rates on government-backed USDA loans are around 7% APR.

Actual rates vary by lender, credit score, down payment amount and other factors. Work with your lender to determine your rate.

Here are the current rates and terms on USDA loan programs:

USDA Guaranteed

• Up to 30-year fixed rate mortgage
• Average interest rate around 7%
• No down payment required
• No monthly mortgage insurance

USDA Direct

• 33-38 year fixed rate loan term
• Interest as low as 1% for very low-income borrowers
• Payment assistance subsidies available

USDA Home Improvement Loan

• Up to 20-year term
• Fixed interest rate of 1%
• Max loan amount $40,000

Always verify current rates and APRs with your individual lender, as they can fluctuate.

What Florida Areas Qualify for USDA Loans?

In Florida, eligible areas for USDA rural housing loans fall into a few main categories:

• Small towns with populations under 10,000
• Rural parts of larger towns with 10,000-20,000 people
• Low population density zones on the fringe of urban areas
• Some suburban neighborhoods and census tracts

So you don’t necessarily need to buy deep in the countryside. Subdivisions and neighborhoods on the outskirts of larger towns can still qualify depending on density, distance from urban centers and how the area is classified by the USDA.

Some examples of cities and towns with neighborhoods that may be eligible include:

• Spring Hill
• Palm Coast
• Port St. Lucie
• Cape Coral
• Lehigh Acres
• Bartow
• Port Charlotte
• Zephyrhills
• Palatka
• Frostproof