Blog

An Overview of Rural Development Loan Programs

An Overview of Rural Development Loan Programs

March 14th, 2013

Door

The mission of rural development programs is to assist low to moderate income rural families qualify for homeownership. Living in rural areas, it can sometimes feel like you’re forgotten and lack many of the resources that families living in the cities and suburbs take for granted. Rural development programs improve the quality of life for rural families that live in these isolated and lightly populated areas and help them acquire their own homes, just as low to moderate income families have when living in populated areas.

The other good news about rural development program is that depending on where you live, the government might consider this “rural” property even though you don’t.  For instance, most of St. Tammany Parish is eligible for rural development programs!  If you’re not sure about your location, please ask me, but don’t assume that just because you don’t live out on a farm you don’t qualify.

Currently, there are more 88 programs that target rural economic development, with the United States Department of Agriculture administering the greatest number of programs. While these programs touch on a number of areas, including economic development, housing preservation and telecommunications, rural housing remains a prime focus.

The Reason Behind Rural Development Programs

In rural communities, there is often an inadequate supply of affordable, well-maintained homes. As a result, more mobile homes are popping up, and plenty of rural homeowners have no access to clean drinking water and safe waste disposal systems. For those rural families that can actually afford to purchase a home, they are faced with other difficulties, such as the fact that loans are harder to obtain because there are fewer lenders available in rural areas. Additionally, rural families use more of their paychecks to afford their homes than their urban counterparts.

Everyone is entitled to a decent home and a suitable living environment according to the Housing Act of 1949, which was born out of the post-World War II era when homes were diminishing, leaving people to live in unsuitable conditions. Building safe, affordable homes became a prime focus during this time period, but it seems to have lost its way once again, mainly in rural areas. There is certainly no shortage of new neighborhoods with single-family homes, townhomes and condominiums in the urban areas, but the rural neighborhoods need more attention.

The Role of Rural Development Programs

With today’s rural development programs, local lenders partner with the various programs and provide 100% financing opportunities to rural families who qualify. Lenders include banks, credit unions and community-managed lending pools. These loan programs have low interest rates and affordable loan terms that make it possible for low to moderate income families to purchase a home. There are some things to consider, however, such as the fact that families much purchase a rural home and have a household income that does not exceed a certain amount.

Here are some more details surrounding rural development programs:

  • Financing is 100% with no down payment required.
  • Guarantee Fees can be rolled into the loan amount.
  • Closing costs or lender fees may be rolled into the loan amount under certain circumstances.
  • There is no maximum purchase price.
  • There are flexible credit qualifications, assisting those with poor credit.
  • Not limited to first-time homebuyers.
  • Available for all types of homes, including condominiums, new construction and modular homes.
  • Money from grants, gifts or mortgage credit certificates are allowed.
  • If repairs need to be done on the home, they can be rolled into the loan.

It’s obvious that there are many benefits to rural development programs for housing. They have fewer restrictions compared to other types of loan programs, and they are not limited to first-time homebuyers or those with good credit. In fact, many of the programs provide fixed-rate mortgage financing to low-income families that weren’t able to obtain financing from anywhere else. These families, however, are provided with “supervised credit” that delivers credit counseling during difficult financial times.

Another advantage is that the funds provided by these programs can also be used to renovate or repair an existing home. This is an important benefit in rural areas where there isn’t a lot of new construction and instead many older homes that require a lot of work. If these houses are not renovated, they are more likely to sit abandoned and contribute to the poverty and low safe housing inventory in rural areas.

For more information on rural development programs, visit the USDA.gov website, or contact me today directly!