Buying a House? The USDA Might Give You a Loan, Even If You’re Not a Farmer

buying a house
Alex Serebrennikov under Creative Commons
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Buying a house can be daunting.

Socking away enough cash for a down payment, choosing from a wealth of lenders and learning about the real cost of home ownership could send anyone’s head spinning — and that’s on top of finding your dream home!

But if you’re willing to let go of big-city living, consider a lender you might find surprising: the United States Department of Agriculture.

Where Can You Live?

Unless you plan on keeping chickens and cows, or living in the boondocks, you might think a loan from the Department of Agriculture won’t work for you.

As it turns out, the “rural” requirement isn’t as limiting as you might think. Check out the eligibility map at USDA’s website — lots of qualified territory is downright suburban, especially in the Northeast.

How Does It Work?

Aimed toward low- to middle-income households, USDA loans are a great option for those with an imperfect (or nonexistent) credit history. They require a low (or no) down payment, and you don’t even need to be a first-time home buyer!

The USDA began the loan program in 1991 to stimulate rural home ownership, but since “rural” means very different things for Massachusetts versus Montana, you might be able to use the loans toward a home in your area.

Plus, the loans have low interest rates and payback periods of up to 38 years. Curious yet?

Are You Qualified to Receive a USDA Loan?

There are two types of USDA loans — Direct and Guaranteed — with varying qualifications and restrictions, but if you earn lower-than-average income for your area, you probably qualify.

Holly at The Simple Dollar does a good job breaking down the differences between the two. Here’s a quick summary:

Direct loans are just that — loans directly from the USDA, intended for lower-income home buyers making up to 80% of the median income in their area.

The qualifications are a little more stringent on this type of loan. For instance, you must be without decent, safe and sanitary housing.

Guaranteed loans are procured through an approved third-party vendor and backed by the USDA, and are therefore more flexible.

You might qualify even if you make up to 115% of the median income in your area, and you’re allowed to use the funds for a larger variety of restoration and upgrades.

Even if you’re not sure you’re qualified, it could be worthwhile to check. The USDA might make an exception for you or present other options for assistance.

How to Apply

Head on over to the USDA’s website and locate a service center in your area. Once you find your contact, pick up the phone or shoot an email to being your homeownership journey.

Your Turn: Would you give up the urban lifestyle to score a loan for a more rural home?

Jamie Cattanach (@jamiecattanach) is junior writer at The Penny Hoarder and a native Floridian. She’s passionate about learning, literature, chocolate and finding ways to live the good life as cost-effectively as possible.