Leveraged Loans

Rural Development offers a home financing initiative with our leveraged loan program. A leveraged loan is a Rural Development loan along with a loan or grant from another funding source that allows mortgage financing up to the appraised value of the property, thus no down payment is required. Other funding sources include commercial banks and mortgage companies. By combining our limited loan funds with other lenders, state and local governments, and non-profit organizations, low-income customers can be served at blended, below market interest rates.

Leverage loans are a requirement for all low-income applicants. Loan amounts are determined based on ratio analysis coupled with market area housing loans typically made by the Agency.

Leverage loans enable the agency to assist more applicants by combining resources with other lenders. Leverage loans receive a processing priority.

To encourage participation by lenders, the Agency generally will subordinate its lien position even when the Agency provides a larger loan share.

Processing is streamlined as the Agency can accept the lender's application and income information and permit the lender to conduct appraisals.

All housing loans may be made for up to 100 percent of the Rural Development appraised value. Normally, the maximum repayment period is 33 years. The maximum loan limits can not exceed the area loan limits established for a given locality. There is no application fee for Rural Development; however, payment of closing costs, credit reports, and other incidental loan closing costs is customarily paid by the applicant. These expenses may be included in the loan under certain circumstances. Typically, the lender is responsible for establishing and maintaining an escrow account for the timely payment of taxes and hazard insurance.

Applications can be made at the Rural Development local office serving the area in which the house will be located or at the lender's office.