Many home buyers in Alabama still don’t know about the 100% USDA Rural Housing mortgage program. The Alabama USDA RD program is a “less known” government sponsored home buying program that allows eligible buyers to purchase a home with little to no money out of pocket. 100% financing is hard to come by today in Alabama, but still possible with USDA. Similar to other government backed loans like FHA and VA, USDA loans are processed through approved lenders, banks and brokers.
Let’s look at the latest Alabama USDA RD Mortgage Guide below.We will also discuss some of the benefits and possible challenges of the USDA Rural Housing program.
- 100% Financing – no down payment.
- Single loan at a 30 Year low fixed interest rate
- USDA Closing costs, home insurance, and taxes escrow can be rolled into the loan, or paid by the home seller
- You don’t have to be a first time home buyer
- Low monthly mortgage insurance (PMI) required
- Large bank savings NOT required
- Simple credit requirements (like FHA, minimum: 620 credit score)
USDA loans are not for everyone, let’s look at some of the restrictions for home buyers:
- Single Family Homes only (can’t purchase duplexes, apartments, etc.)
- No mobile homes
- No “fixer-uppers” (standard homes in working order that meet basic HUD compliance)
- No “build on your own lot”
- Student loan debt – cannot be deferred, must be counted towards debt to income ratios.
- Property must be located in a USDA approved area – see below
- Income for the household must be below the set county limit
USDA Approved Locations:
USDA home loans are not for the “big cities”, but most surrounding suburbs in cities like Birmingham, Montgomery, Mobile, etc still qualify. If you qualify for an Alabama USDA mortgage, many times it can be a more attractive mortgage program than other options like FHA loans. USDA mortgage insurance is nearly 30% less. The home (any seller – short sale, foreclosure, bank owned) must be located in a USDA approved are according to the map here.
USDA Income Restrictions:
Rather than having a loan purchase limit, USDA has household income and debt to income ratio limits. The household income limits vary by county and household size. For most counties in Alabama, the family income limits start at 75,000 and up – depending on the size of the family, county, and other factors.
Common misconceptions of the USDA Rural Housing loan program:
- USDA loans are just for ranchers and farmers – USDA Loans are not “just for farmers,” millions of home buyers from all walks of life already qualify.
- USDA loans are not flexible – The truth is USDA loans can be used to buy a new home (located in a USDA approved area) or refinance to a lower rate (for home owners that already have a USDA loan)
- Only certain people can qualify – Anyone who meets the income and credit guidelines can qualify for a USDA Rural Development loan.
- They are only for rural areas – Actually, USDA Loans are available in many areas that most people would not consider “rural” For example, many small communities just outside of metropolitan areas qualify as rural areas according to the US Department of Agriculture.
- FHA or Conventional Loans are better – USDA home loans often offer better terms than an FHA or conventional loans. In addition, the mortgage insurance is cheaper.
- They are harder to get than FHA or Conventional Loans – This just isn’t true. In many cases, USDA Loans are actually easier to get because the loans are guaranteed by the government.
- USDA loans take months to close – Maybe in the past, but not true today. USDA loan close just as fast as other home loans these days. Buyers can go under contract to purchase a home and close about 30 days later.
USDA Mortgage Source is nations leading USDA loan specialist. If you have questions, or want to get pre-approved, please submit the short Info Request Form on the right side of this page. Mobile phone users can find the Info Request at the bottom of their page. You can also call us 7 days a week at ph: 800-743-7556.
We serve all of Alabama in 2017 including: Birmingham, Montgomery, Mobile, Anniston, Huntsville, Tuscaloosa, Hoover, Dothan, Decatur, Auburn, Oxford, Albertville, Selma, Trussville, Troy, Tillmans Corner, Center Point, Helena, Hueytown, Talladega, Fairhope, Ozark, Scottsboro, Cullman, Foley, Madison, Florence, Gadsden, Vestavia Hills, Phoenix City, Alabaster, Bessemer, Opelika, Enterprise, Homewood, Northport, Prichard, Athens, Daphne, Pelham, ALA