What is a Rural Housing Loan?

What is a Rural Housing Loan?
by Jerome Foster - June 12, 2021

Do you want to know what is a rural housing loan? Let’s start!

Rural housing loans offer loans to build, buy or improve a permanent resident in a rural area.

Direct and guaranteed loans may be used to buy, build, or improve the applicant's permanent residence. New manufactured homes may be financed when they are on a permanent site, purchased from an approved dealer or contractor, and meet certain other requirements. Under very limited circumstances dwellings can even re-financed with direct loans if you have a good credit history! The value of your home must stay within limits however as it is important that houses remain modest in order for them to continue looking decent while remaining safe.

Who is eligible for Rural Housing Loans?

In order to qualify for this benefit program, your property must be located in an eligible rural area. Applicants must have very low-, low- or moderate incomes that fall below a certain threshold based on the median income of their local region (very low is defined as below 50% AMI; Low-income falls between 50%-80%; Moderate Income ranges from 115%). Families without adequate housing and able to afford payments will also need to meet other requirements before they can apply.

 Qualifying repayment ratios are 29% for PITI to 41% for total debt. In addition, applicants must be unable to obtain credit elsewhere and have an acceptable credit history. You must be a US citizen or permanent resident!

What are the loan terms for Rural Housing Loans?

Direct loans are repaid over 33 years or 38 years, depending on your adjusted annual income. Payment assistance is granted to borrowers at a rate of one percent if they have an adjusted family income that does not exceed 60% of the area median income. But when you live in public housing and leave there for some reason, the government will reclaim their payment assistance from you!

 There are no deferred mortgage loans available to purchase a home and the interest rates for guaranteed mortgages are up to the lender. There's also no required down payment, but lenders use various ratios when determining repayment feasibility.


  • Jerome has worked for an international real estate magazine in the past before joining Prudentialcal. He now spearheads our team of writers and ensures the quality of content we produce weekly.

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