The Washington PostDemocracy Dies in Darkness

You don’t have to move to the country to get a USDA Home Loan

The USDA’s definition of “rural” is really a lot broader than people probably assume when they’re thinking about their home-buying options. It really comes down to population density. (David Zalubowski/AP)

As people continue to work from home while the pandemic lingers, some are wishing they had more space to accommodate their new stay-at-home lives.

No longer tied to a commute and an office, they can work and live anywhere with a good Internet connection. Low mortgage rates make it possible for many people to afford to buy, particularly if they move farther from a city center. Depending on where you live, a USDA loan may be an option.

The U.S. Department of Agriculture rural lending program offers a zero percent down payment option and generally has lower interest rates than conventional loans. The loan program is based on the home’s location as well as buyer qualifications and income limits. Surprisingly, the addresses that could qualify are within minutes of some major cities across the United States, including D.C.

If you aren’t bothered by higher monthly payments, a 10-year mortgage might be a good option

We asked Edward Barry, chief executive of Maryland-based Capital Bank to explain how this little-known program might help some home buyers. Barry offered the following insights via email.

● What makes a USDA loan an especially great option for first-time home buyers is the flexibility of not having to save for the down payment as they offer a zero percent down payment. For folks just starting out, there is a lower-income allowance for USDA loans (although the range of eligibility is determined on a state and county level) as well as lower credit score requirements. And, given that they usually have lower interest rates than conventional 30-year fixed loan options, it can be easier on the budget, too.

● Getting the right type of loan can make a big difference on a new home buyer’s monthly payment and their budget.

● The USDA’s definition of “rural” is really a lot broader than people probably assume when they’re thinking about their home-buying options. It really comes down to population density. For example, there are areas 30 minutes from D.C. that people don’t think of as “rural” with residential addresses in those regions that are eligible for a USDA loan.

● It’s important to note that a lender has to be approved to offer this type, and other types, of government-backed loans.

● One more potential advantage of a USDA loan: USDA offers a streamlined refinance, meaning it’s comparatively easier than a traditional conventional loan refinance.

Finding the right lender is important

● Of course, no two home buyers are the same. That’s why it’s important to have a knowledgeable lender who takes a personal approach to applicants, who listens and clearly lays out all their available options.

● Home buyers should make sure the lender’s loan officers will personally guide them through the application process, listening to their goals and learning their limitations to ensure that the mortgage aligns with the home buyer’s individual needs. It’s that personalized guidance that makes all the difference in securing the right loan, such as identifying whether a USDA loan or potentially other government-backed loans may be an option.

● Some lenders don’t even know about this under-the-radar USDA loan, and not all lenders are approved to offer this type of government-backed mortgage.

To learn more about eligibility for a USDA loan, click here.

Read more in Real Estate:

Study: More big-city renters and homeowners considering smaller markets in wake of pandemic

Buyer interest in suburban over city living grows in May, report finds

New York-style condos in D.C.’s NoMa to include high-end amenities