Rural Development Loan Interest Rates in Louisiana

Buying a home is an exciting milestone, but it can also be a daunting process especially when it comes to financing. For many living in rural parts of Louisiana, USDA Rural Development loans offer an affordable path to homeownership. These government-backed loans come with below market interest rates and require no down payment. Let’s take a closer look at Rural Development loan interest rates in Louisiana.

Overview of the Rural Development Direct Loan Program

The USDA Rural Development Direct Loan Program also known as Section 502 helps low-income individuals and families living in eligible rural areas obtain decent, safe, and affordable housing. These loans are available for purchasing, building, repairing, renovating or relocating a home. They can also be used to purchase and prepare a site, including providing water and sewage facilities.

To qualify for a Rural Development direct loan in Louisiana, applicants must meet certain eligibility criteria:

• Have an income below the program income limits for their area
• Be unable to obtain traditional credit elsewhere
• Be willing and able to repay the loan
• Be a U.S. citizen or qualified alien
• Occupy the home as their primary residence

The home must also be located in an eligible rural area and fall under the maximum property value limits for that county. Louisiana has 64 parishes designated as eligible rural areas by the USDA.

Current Interest Rates on Rural Development Loans in Louisiana

As of June 2022, here are the current interest rates for Rural Development direct loans in Louisiana:

• 4.75% for low-income borrowers (income below 80% of area median income)
• 1.00% for very low-income borrowers (income below 50% of area median income)

These interest rates are fixed for the life of the loan and are typically below current market interest rates. For example, the average 30-year fixed mortgage rate in Louisiana is currently around 5.5%.

Rural Development is able to offer interest rates below market because the loans are government-subsidized. The interest rate can be subsidized down to 1% for applicants who need payment assistance. Eligibility for payment assistance is based on the household’s adjusted income.

How Interest Rates Are Determined

Rural Development direct loan interest rates are based on the current market rate at the time of loan approval or closing, whichever is lower. Here is how it works:

• USDA conducts an annual survey of average mortgage interest rates from private lenders.

• The average survey rate determines the Rural Development standard interest rate for that year.

• As of June 2022, the standard rate is 4.75%.

• If interest rates decline before an applicant’s loan closes, they receive the lower rate.

• Very low-income applicants are eligible for a subsidized 1% interest rate with payment assistance.

By tying interest rates to market conditions, Rural Development is able to keep pace with current rates and offer affordable financing.

What Factors Affect Your Interest Rate?

Within the standard Rural Development rates, your specific interest rate will depend on:

• Your income: Lower income applicants qualify for a lower interest rate.

• Payment assistance: If you receive a payment subsidy, your rate can go as low as 1%.

• When you lock your rate: If market rates go down before closing, you get the lower rate.

So be sure to find out the current standard rates when starting your application. Work closely with your loan officer so you can lock a rate or qualify for payment assistance before market rates change.

How Low Can Your Interest Rate Go?

The lowest possible interest rate on a Rural Development direct loan in Louisiana is 1%. To qualify for the 1% rate, you must:

• Have an income below 50% of the median income for your area
• Show a need for payment assistance
• Be unable to afford the loan at standard rates

Payment assistance limits your mortgage payment to 24% of your household income. If you receive a 1% interest rate with payment help, you’ll get one of the most affordable mortgages possible.

Benefits of a Lower Interest Rural Development Loan

The low interest rates from Rural Development loans give buyers major advantages, including:

• Lower monthly payments – More of your payment goes to principal.

• Less interest paid – Compared to a higher rate mortgage.

• Improved affordability – Manageable payments even on a modest income.

• Faster equity building – Shorter path to reaching 20% home equity.

• Quicker debt payoff – Own your home faster with less interest owed.

Clearly, securing the lowest rate possible on a Rural Development loan can make homeownership much more affordable for low-income rural families.

How to Apply for a Rural Development Direct Loan

Ready to explore your options? Here are some tips for getting started:

• Contact your local Rural Development office to learn current rates.

• Use the eligibility assessment tools to see if you qualify.

• Work with a USDA approved agent who can guide you through the process.

• Get pre-qualified to lock in an interest rate.

• Compile all required documentation early in the process.

• Keep in close touch with your loan officer throughout.

With a Rural Development direct loan, you can achieve the dream of homeownership even on a modest budget. Be sure to take advantage of their below market interest rates that can stretch your buying power further. Contact your local USDA office in Louisiana today to kickstart the journey to your new home.