One such loan is the rural housing loan. Rural housing loans are also referred to as USDA loans, which is short for the U.S. Department of Agriculture Rural Development Guaranteed Housing Loan Program.
Rural housing loans geared towards promoting development in rural areas. The USDA believes that by enabling people in rural areas to own homes, then this can not only help to build stronger communities but it also helps to improve the quality of life in these regions.
What Makes Rural Housing Loans Different From Conventional Loans?
In this context, the terms “conventional loans” refers to the types of loans that don’t receive government backing. When it comes to paying back for these loans, you make monthly payments with interests. USDA loans differ from conventional loans in several ways.
No Down Payments
One of the biggest challenges that deter people from buying homes is raising enough cash for a down payment and closing costs. While there are some conventional mortgage lenders that offer loans with a down payment below 20%, the payments are usually higher due to the inclusion of Private Mortgage Insurance.
However, if you are looking for a mortgage loan that doesn’t require any down payment, then there only two types of loans that you can go for: VA loans(if you are a veteran or a veteran’s family member) or a USDA loan. But remember that you will still have to pay the closing costs.
Low Rate Mortgage Insurance
In rural housing loans, you still have to pay for mortgage insurance, however, it is far much less than then Private Mortgage Insurance applied in conventional loans. The mortgage insurance rate is capped at 1% of the loan amount and this payment is meant to support the rural housing loan program .