USDA Rural Development Business Grant & Loan Eligibility

12Oct11

The United States Department of Agriculture (USDA) offers programs that help spur business activity as well as provide affordable financing for those who live in rural areas. These programs are no longer known as farmer’s loans. Since the expansion of the program, over 50 million Americans live in areas that are considered rural by the USDA.

While Denver doesn’t qualify as a rural area, there are many surrounding areas and suburbs that fall under the qualifications of the USDA rural development program. These areas can easily be found on the USDA’s Eligibility Map.

Business Grants and Loans

The USDA  is the leading advocate for rural communities and private enterprises. The USDA’s mission is to support rural communities and enhance the quality of life for rural residents through providing economic opportunities, community infrastructure, increasing environmental health, as well as sustaining agriculture production.

The way the USDA provides these opportunities is through their Rural Development Program. Under the program, small business owners are given the opportunity to gain educational training, technical assistance, and tools to start small businesses.

There are different types of grants and loans available to small businesses owners, which means doing your research is necessary. The USDA offers a complete listing of their business grants and loans on their website, which is a great resource.

Home Loans

The USDA Rural Development Program isn’t specifically for businesses, but for the whole rural community. The USDA  offers home loans through the Department of Rural Development to help homebuyers purchase homes in rural areas. The department offers three separate programs, the Guaranteed Loan program, the Direct Loan program, and the Mutual Self-Help Housing program, each of which allows prospective homebuyers to secure financing without a down payment.

What are the Benefits of a USDA Loan?

In addition to not requiring a down payment for qualified borrowers, a  USDA home loan is a popular choice due to:

  • Lenient eligibility requirements
  • No private mortgage insurance
  • Attractive interest rates

What is the Differences Between the Loans?

The USDA home loan is specifically designed to help those who would like  to live in rural areas, and the department offers three different loans to meet the needs of varying individuals.

  • Mutual Self-Help Housing Loan

The Mutual Self-Help Housing Loans is forvery low to low-income households wishing to build their homes in a rural area. This is for those unable to purchase safe housing in a region, and house in the program help each other complete 65 percent of the construction of each other’s homes. This program is funded directly through the USDA.

  • Direct  Housing Loan

The Direct Housing Loan is also for very low to low-income households, but is designed to allow low-income individuals purchase a home within their means as opposed to building one. This program is also funded directly through the USDA.

  • Guaranteed Housing Loan

The Guaranteed Housing Loan is for borrowers who are more financially stable, which makes this is the most common USDA loan. Those eligible for this type of loan are allowed to have an income of 115 percent of the area’s median household income. This program is funded through any lending institution certified to handle USDA loans.

Who is Eligible?

Many prospective applicants who hear of the USDA Rural Development program assume they are not eligible believing the program was designed solely for rural living. While the program does cater to rural areas, there are thousands of citizens that are eligible for the program. In fact, of the 50 million individuals eligible for the program in 2010,  only 150,000 only took advantage of it. Determining eligibility can be done easily through talking to a USDA Home Loan Specialist or by contacting the USDA for business loans and grants.

Because the USDA Rural Development Program is designed to benefit moderate to low income households in rural areas, the program has some very lax eligibility requirements. In order to secure a USDA home loan, interested  borrowers must:

  • Be purchasing a home in an eligible area
  • Be able to pay monthly mortgage payments

Although the USDA home loan program does have lenient eligibility requirements, prospective borrowers will still need to have a reasonable credit score of 620 in order to obtain financing. All interested in the program are encouraged to ask their local realtor for a listing of USDA homes and to submit an application with an approved lender.

Written by Matt Polsky – a mortgage commentator associated with USDALoans.com, a company dedicated to the development of rural areas.



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