USDA LOANS: THEYRE NOT JUST FOR HOMES IN THE BOONIES

If yoursquo;re saying to yourself, ldquo;But USDA loans are only for homes out in the sticks,rdquo; we get it. Itrsquo;s true that the loans were designed to help buyers in rural areas. But ldquo;ruralrdquo; is a broader term than you may know.nbsp;

On the USDA website, you can enter an address in the search bar and check if its eligible, or you can drop a pin in a location to find out whether USDA financing is available in the area. We tested a couple of locations with interesting results: Frisco, TX, currently the fastest-growing city in the nation, is not eligible for a USDA loan, but Prosper, just to the north and being called, ldquo;The next Frisco,rdquo; is. The popular Valencia, CA masterplan north of Los Angeles is not eligible, but areas of Santa Clarita, the city in which Valencia is located, are.nbsp;

For single-family homes, there are two main options for USDA loans:nbsp;

USDA Single Family Housing Guaranteed Loan Program

There is no down payment required for this type of loan and the low minimum credit score requirementmdash;scores as low as 620 make the cutmdash;make it even more attractive for buyers.nbsp;

Your income must fall within the ldquo;moderaterdquo; category, which is defined as an amount below 115 of the arearsquo;s median income. You can check by state and county here. Loans are for 15 or 30 years, and there is no limit to the amount of square footage on eligible properties.nbsp;

USDA Single Family Housing Direct Home Loans

This program is intended for low-income homebuyers. Down payment requirements are low, and subsidies can take the down payment to zero. ldquo;Payment assistance, also known as subsidy, is granted to eligible very low- and low-income homeowners who obtain a Single Family Housing Section 502 Direct Loan from USDA Rural Development,rdquo; said the USDA.nbsp;

ldquo;The borrower signs RD Form 3550-12, Subsidy Repayment Agreement, at loan closing. The agreement outlines the subsidy repayment terms, the requirement to repay all or a portion of the subsidy received over the life of the loan i.e., subsidy recapture, and how subsidy recapture is calculated.rdquo;

Loans are for 33 or 38 years, and income limits are strict; you can see individual county limits here. In addition, the USDA mandates that properties generally benbsp;2,000 square feet or less. The direct loan typically requires a 640 minimum credit score.