Buying nice homes is not only the right of wealthy people and the ones that live in the urban parts of the country. No matter the income, and no matter the socioeconomic background, everyone wants to own a home they can raise their families in.
That is where the government steps in; giving out mortgage loans to people with a low income.
An RD loan is called a Rural Development loan that is financed by USDA, United States Department of Agriculture. RD loans are given to people with low-to-moderate incomes who wish to buy homes in the rural part of the country, these loans come with a zero down payment policy for eligible homeowners.
In 2017, as a part of its Rural Development program, the USDA helped around 127,000 families buy and upgrade their homes. The program is designed to improve the economy and quality of life in rural America. It offers low interest rates and no down payments, and is easily accessible to most borrowers.
The way an RD loan works is simple, with the zero down payment policy, borrowers can request for 100% coverage of the mortgage and with a low interest rate, it isn’t too hard for most people to pay anyway.
There are three types of an RD loan:
Luckily, the eligibility criteria for an RD loan isn’t too complicated either. A primary requirement for this is the geographical location. The area should be considered ‘rural’ for you to qualify for an RD loan, should have less than 20,000 people in population and have a lack of available credit.
Other than that a credit score of at least 640 is required, and a borrower must not have any other source of financial aid. Typically, the criteria is as follows:
While an RD loan sounds like an excellent mortgage opportunity for low income borrowers, there are a few risks to it too. Here is a list of the pros and cons of an RD loan:
Like mentioned above, there are certain hidden charges associated with fully funded loans; however, that doesn’t stop people from applying for RD loans. Low income households consider this a golden opportunity to own homes and live there with their families.
The biggest attraction that people have with these loans is that they require zero downpayment and a very low interest rate regardless of the credit history.
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