Lender Guide
Federal Guarantees for Rural Home Loans

Our home loan guarantees help private lenders safely increase their investment in mortgages for income-eligible families or individuals buying or building a home in a qualified rural area.

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How do I become an approved lender?

For nationwide or multi-state approval, send the Lender Agreement and documentation to the RD National Office. For information on becoming an approved lender in Alabama, contact the USDA Rural Development staff in Alabama.

How much is the federal guarantee?
90% of the principal amount of the loan.

What are the adjusted income limits for a USDA Home Loan Guarantee?
USDA Rural Development adjusted income limits are based on a number of local demographic factors and vary by county.

For details on how to calculate a borrower's adjusted income for the purpose of qualifying for a USDA Rural Development Home Loan Guarantee, contact the USDA Rural Development staff in Alabama.

Are there other borrower eligibility restrictions?
Borrowers must be U.S. citizens or permanent legal residents.

Does the home qualify?
Use our online Address Search to find out if the property to be purchased is in an eligible rural area.

Loans guaranteed by USDA may be used to buy or build a single family residence, including the cost of land. Land value may not exceed 30% of the total property value.

Is there a set maximum loan amount?

A borrower's maximum loan amount is determined by their ability to repay the loan.

Closing costs may be included in the loan (no discount points).

Appraised value may be exceeded by the amount of the guarantee fee, up to 102% LTV.

Are there benefits for the borrower?

  • No down payment required.
  • 29% PITI (principal, interest, taxes and insurance).
  • PITI plus all other monthly debts may be up to 41% of Repayment Income (waivers allowed).
  • Low guarantee fee of 2%. Annual Renewal is just .3%. Low refinance fee of 1.5%.
  • Guarantee fee may be included in the loan up to 102% of appraised value.

How much paperwork is involved?
The application process may be completed online using a lender's standard forms and the Guaranteed Underwriting System (GUS), free for approved lenders.

Credit scores of 640 or higher merit streamlined credit documentation. No PMI or MIP required.

How long does approval usually take?
Home loan guarantee applications are processed in the order received. Depending on the time of the month, approval typically takes three-four business days depending on the volume of applications received.

Does Rural Development set the terms?
Yes and No.

The loan term is set at 30 years.

Interest rate and other terms are determined by the lender and buyer.

Is there a deadline to apply?

Home Loan Guarantee commitments are made year round as long as funding is available. Applications are processed in the order received.

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Why does Rural Development make home loan guarantees?
Home Ownership Strengthens Communities. A good home is more than just a roof overhead. Homes are the cornerstone of our communities. They help families achieve economic stability and build savings over time that can help meet needs like education and retirement. Rural Development programs ensure Americans living in rural areas have access to affordable, well-built homes near jobs, schools, healthcare and public services.