Minimum Requirements For USDA Direct Housing Loans

Who Can Get USDA Rural Development Direct Loans

When the mortgage markets get as tight as they are, getting mortgage loans for people with bad credit or low income, becomes ‘mission impossible’. In this review you can learn more on ways USDA Rural Development Direct Housing Loans can help you achieve a home loan, even if your income is low, or you have low credit score.

Being a homeowner is a dream many Americans can not accomplish, at present times, it becomes even more difficult for people to have any hope for homeownership. For these people the following direct housing loan plan can be the only hope for reaching their dream.

USDA Rural Development Financial Assistance

The USDA have many ways to help home buyers, in such ways both sides get their basic interests fulfilled. Not too many people know about the 0 down home loans programs the USDA is offering home buyers at specific zip codes where the federal government wishes to strengthen the community. The surprising thing about these programs is that some of the zip codes are not rural at all!

In the same way, the direct housing loans which are offered are also targeting specific rural zip codes in each of the states, but while one may expect a hut deep in Montana snowing peaks, some of the places may be just off road a few miles away from cities and towns.

What Can Be Done With The Direct Housing Loan

The loans will be granted to any kind of assistance to acquire housing for low income families. This means the money can be used for buying a house, repairing a house, renovate or relocate a home. The funds will be allowed even for purchasing land and preparing a site (paying for sewage facilities) for future housings.

So if you find a farm, a home, or a place which now looks as a wreck, by applying for the USDA direct housing loan, you may be granted a loan to rebuild the property for domestic housing needs.

When Direct Housing Loans Are NOT Approved

The definition is “Modest”. The USDA Rural Development will not approve an application for a direct housing loan for any kind of property. If the property is too ‘fancy’ or overpriced, the application would probably be declined. How can you know if the property is ‘modest’? The simple answer is to look around, do some kind of ‘appraisal comp’, compare the house to the houses down the street or location.

For example – If the house has a pool, if it is substantially larger (more rooms than other houses in the area) ,then it might not be approved by the USDA for the direct loan program.

Direct Housing Loans Minimum Requirements

The USDA is seeking to assist those who otherwise find it difficult to assist them selves. This means that the minimum requirements for the USDA direct housing loans are approved to those who otherwise will not be approved anywhere else. But since it is government backed money, even the highest risk has it’s limits, and the USDA Rural Development decline applications which seem hopeless to be funded.

Low Income Requirements

The loans will be granted to LOW or VERY LOW income families. Take notice that there is no obsolete ‘income’ amount, the income level to determine who is ‘low income’ is a factor of two parameters: Family income, and Area Median Income (AMI).

You need to check the AMI in your area (the area you plan to live in) and compare your income to the Median Income. If your income meets these limit levels, than these direct housing loans are for you:

  • VERY LOW INCOME – Will be less than 50% of the area median income.
  • LOW INCOME – Will be 50% – 80% of the area median income.

Minimum Financial Requirements

The direct housing loans are not grants, the loans are processed by USDA approved mortgage banks and lenders, who expect to get their money back. So families which apply must show they have the possibility to pay back the mortgage loan.

Now here is the catch.. These families should prove they can pay back the direct housing mortgage loans but have no chance to get a mortgage loan anywhere else.

So people with very low credit score (below 550) with low income levels who will be declined by any lender, can try to apply, and prove they are worth the trust of the USDA and meet the minimum USDA requirments to approve them for the loans.

What Kind Of Direct Loans To Expect

Most of the loans are issued for up to 33 years or even longer (up to 38 years!) for people who would not be able to stand the 30 year mortgage payments. The debt-to-income ratio for these families is 24%, so the mortgage payments, and the rest of the family debts, should not be more than quarter of the family income.

The loans have a limit too, you can not expect to request for loans which are higher than the average property value at the rural area. So the appraisal comps is wise to find the value of houses in the area, and request a loan which is within the reasonable home value.

Since the USDA knows that paying back direct mortgage loans still be a challenge for many families (especially when they aim at very low income levels) some of the families may expect payments assistance subsidy.

Direct Housing Loan Conclusion

Do not give up on the dream for home ownership. If you are willing to move to an area which the government call ‘rural’ and willing to commit yourself to 100% iron clad loan payback guarantee, then the USDA direct housing loans just might be your option to be a home owner at 2015.

So What is The Next Step?

If you will do nothing.. don’t expect anything to happen.

If your score is below 700, you might want to clean it yourself – get this ‘Credit Repair University’ which will save you money and time.

Yes, you might need to invest a small sum to get a grip of things.. But if you think education is expensive.. try ignorance..

You are probably paying thousands of dollars per year in fees and interests to credit companies which could be going straight to your pocket. So do your math…