Guaranteed Residential Loans

Our approved lenders offer the guaranteed residential loans to eligible moderate or low-income families. The application is made, processed and closed at a participating lender’s office. Approved lenders are able to offer this "no down payment" loan because Rural Development guarantees the loan. A Guaranteed Residential Loan means that Rural Development will repay all or most of losses suffered by the lender in cases where the borrower should default on the loan. Borrower's are not required to purchase mortgage insurance.

• Purchase a new home.
• Purchase an existing home.
• Purchase and improve an existing home.
• Condominiums are acceptable, but must be mature.
• Legal fees, title services, loan closing costs, establish escrow accounts.
• Refinance an existing Guaranteed Rural Housing Loans.
• Manufactured homes are acceptable, but must be brand new and purchased from approved dealers/contractors.

NOTE: Refinancing loans cannot include payoff of debts other than the original real estate loan. No cash back at closing.

Eligibility Criteria: 

Detailed eligibility criteria and loan information is contained in regulation RD 1980-D.

• Must not own a dwelling in the local commuting area or own one which is not structurally sound or functionally adequate.
• Be unable to qualify for conventional financing.  Conventional does not include FHA or VA. You may choose between RHS, FHA and VA.
• Be a citizen. Non-citizens must have documentation specifically listed in the handbook posted on the "Processing/Underwriting page for lenders." 
• Have legal capacity to incur the loan.
• Occupy the new home on a permanent basis.

How good is your credit?  

A credit score greater than 660 is preferred. If your credit score is below 620 you cannot have:

• Foreclosure in past 36 months.
• Bankruptcy discharged within 36 months.
• More than one 30 day late on consumer debts in past 12 months.
• Accounts converted to collections within past 12 months.
• Tax liens or delinquent government debts (including student loans).
• Judgments outstanding in past 12 months.
• Outstanding collection accounts.
• Two or more late rent payments in past 12 months

If your credit does not meet this criteria, work with your creditors to clear the problems and apply to your lender for this loan at a later date.

Income Limit:

Your adjusted gross annual household income must be less than the moderate income guaranteed loan limits for Arizona. If your gross household income is over the stated limit, certain adjustments are allowed as permitted in the regulation RD 1980-D. Gross household income is the total income, before any deductions, of all adults who are members of your household.

Finding your county's "Guaranteed Housing Program Income Limits."

To find the limit for your county, first determine if you live in one of the MSA areas. If you live in Maricopa or Pinal counties you will use the Phoenix MSA. If you live in Mohave county you will use the Las Vegas MSA. All other counties are listed and you will use the MSA from that county. You may view and print the chart by clicking on Guaranteed Housing Program Income Limits.

Are you in the "low" income range or less?

The intent of the guaranteed loan program is to assist moderate income families who can afford market interest rates but who cannot qualify for conventional financing due to insufficient saving for the down payment. If your income is in the "low" range or less, you should consider the Agency’s direct loan program (Section 502 loan program).

Property Location:

The property you wish to purchase must be located in an area deemed "rural" by Rural Development. Generally the community must be less than 25,000 persons. Contact the local office serving the county for further information including maps. 

Repayment ability (ratios):

Your monthly house payment, taxes, and insurance should not exceed 29% of the gross monthly income of the lenders signing the promissory note. Your total monthly payments including the house payment, taxes, insurance and other debt payments should not exceed 41% of the gross monthly income.

Restrictions:

• Small farm acreages or ranchettes are not financed. Properties must be residential only.
• No refinancing of consumer debts such as credit cards or car loans.
• No in ground swimming pool.
• Flat roofed dwellings must meet thermal requirements.
• No duplexes.
• Income producing property will not be financed.
• New construction in flood prone areas is not permitted.
• Property should be located on a paved or very good all-weather road.
• Existing properties must meet HUD standards. Contact the your lender or the local RHS office before contracting for an old dwelling. Repairs may be financed into the loan.
• Flood plain houses are subject to limitations.
• Other restrictions may apply.

Maximum Loan:

The loan amount is based on 29/41 PITI and Total Debt Ratios, it does not have a set monetary limit. The applicant’s repayment ability restricts the amount of loan. We have provided the example "How To Pre-Qualify or Estimate Maximum Loan Amount." The loan cannot exceed 100% of market (appraised) value of the property. The property should not be considered above modest value in the community. 

Home Buyer Education:

First time home buyers are expected to complete a home buyers education course. Many lenders offer a course or have home study materials available to you. Another resource is the Consumer Credit Counseling Services in your area. 

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