Farming, forestry and food come to mind when you think of the responsibilities of the U.S. Department of Agriculture (USDA). The agency helps to ensure our food is safe, farms are self-sustaining businesses and forests are fertile and free.
Established by President Lincoln in 1862, the USDA has developed important guidelines to protect the quality of our meat, dairy and produce. If it doesn’t say “USDA Inspected,” it probably isn’t kosher. (You know what I mean!)
What many people don’t know about the agency is that it’s also in the business of providing support to home buyers in rural and suburban areas of our country. The sub-agency known as Rural Housing Service (RHS) operates a range of programs and services for low-to-moderate income Americans that include:
- homeownership options to individuals, including direct home loans and mortgage guarantees;
- housing rehabilitation and preservation funding;
- grants to non-profits who organize self-help housing services in rural communities;
- rental assistance to tenants of RHS-funded, multi-family housing complexes;
- farm labor housing;
- help to developers of multi-family housing projects, like assisted housing for the elderly and disabled, or apartment buildings; and
- community facilities, such as libraries, child-care centers, schools, municipal buildings, veterans shelters and firefighting equipment to Native American groups, nonprofit organizations, communities and local governments.
RHS administers the loans and grants while financial institutions or private lenders guarantee the funding. And what’s great about this option among all government mortgage programs (such as HomeReady and Home Possible) is that qualified applicants do not take a single penny from their pocket for the home loan – 0% down – at low interest. Some 127,000 families in 2017 bought a new home or upgraded their existing one through the USDA and RHS.
The qualifications include:
- U.S. citizenship or permanent residency;
- A monthly payment — including principal, interest, insurance and taxes — that’s 29% or less of an applicant’s monthly income. Other monthly debt payments cannot exceed 41% of the person’s income, but USDA will consider higher debt ratios if the credit score is above 680.
- Dependable and consistent income, typically for a minimum of 24 months;
An acceptable credit history, with no accounts converted to collection agencies within the last 12 months; - Applicants with credit scores of 640 or higher receive streamlined processing. Below that, applicants must meet more stringent eligibility standards.
- Income limits to qualify for a home loan guarantee vary by location and depend on household size; As of August 2019, in Seattle/Bellevue, it’s a combined $88,550 maximum income level for a household of 1-4 people. To find the loan guarantee income limit for the area where you live, consult this USDA table.
- Applications are only for owner-occupied primary residences.
Besides helping the economically disadvantaged, the aim of the USDA mortgage and loan program is to assist farmers, ranchers and many other rural residents keep their businesses afloat by providing the financial means to live, as the USDA mission says, in “decent, safe and sanitary housing” and who would otherwise not receive a conventional mortgage.
While rare in Seattle, USDA loans are more common in eastern King County and of course anywhere there is more dispersed housing, rural countryside and farmland.
To see if a USDA-backed loan is right for you, talk to participating lenders, check these online resources for more information or contact Washington state’s USDA office in Olympia.