Potential homeowners in rural areas often struggle to accumulate enough funds for down payments and closing costs, but there are several programs to help.
Krista Mettscher, a single family housing specialist for USDA Rural Development promoted a few of those programs last week during a visit to Chadron, noting that communities need a successful housing market to thrive.
USDA Rural Development offers two programs for individuals looking to purchase single family homes, both of which offer 100% financing, thereby making a large down payment unnecessary. In conjunction with a lack of available housing, a down payment and the availability of financing are the largest barriers to home ownership, Mettscher said.
Her agency works to provide financing and find ways for homeowners to be successful by staying in their homes long-term.
“We do give our homeowners a lot of different options to stay in their homes,” she said.
USDA Rural Development’s Direct Loan Program offers 100% financing with no down payment and a current interest rate of 3.5%. Subsidies for low-income levels can make the interest rates as low as 1%.
“This program works really well for people on a fixed income,” she said.
There are income qualifications, but many people in rural areas fall within the guidelines. A household of up to four people can earn $54,400, while a household of five to eight individuals can earn up to $71,800 to qualify for the Direct Loan.
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A credit score of 640 and above requires less documentation, but the agency doesn’t ask for potential home buyers to have perfect credit for the Direct Loan Program. In fact, there is no credit score requirement at all, Mettscher said, as financial ability is determined on a case-by-case basis.
The maximum mortgage allowed under the Direct program is $195,000, and home buyers are encouraged to keep their mortgage at no more than 30% of their income. The payment assistance subsidy, which can decrease the interest rate down to as low as 1%, can help home buyers who may struggle with their payments, but the goal is to remove the subsidy as soon as possible, Mettscher said. A portion of the subsidy – generally 20%- must be repaid to USDA Rural Development as soon as the home buyer sells the house, pays off the loan or no longer occupies the home.
The Direct program is a 33-year loan term and requires a whole-home inspection. Home buyers who qualify can use the loan for any modest (2,000 square feet), residential home in good condition, of either existing or new construction.
USDA Rural Development’s other program is its Guaranteed Loan Program, which does require some fees but is still cheaper than most traditional financing options. It’s not available for first-time home buyers, but still provides 100% financing with no maximum mortgage limits. Income guidelines are in place for this program as well. A family of up to four individuals can earn up to $82,700, while a family of five to eight individuals can earn up to $100,150. This program, however, requires a minimum credit score of 580, Mettscher said, but a whole-home inspection of the to-be-purchased property is not necessary. Instead, an appraiser must certify that it meets HUD standards.
The Guaranteed Loan Program also allows potential purchasers to consider buying acreages, but they must be residential, non-income producing properties.
Finally, USDA Rural Development can also help elderly homeowners (age 62 and above) with its Repair Loan Program and Repair Grant Program. The loan program allows homeowners to secure up to $20,000 in financing at 1% interest to make any repairs and improvements to their home. The income guidelines for this program are lower than those for the loans, set at $34,000 and $44,900. The grant program has the same income requirements, but is targeted to repair health and safety issues only by providing up to $7,500 in forgivable financial assistance.
“(The repair/grant programs) are very low-income categories,” Mettscher said.
Other assistance is available in Dawes, Sheridan, Sioux, Box Butte and Morrill counties through the High Plains Community Development Corporation, which is located in Chadron. Rita Horse said home buyers in those counties who meet certain eligibility requirements may qualify for closing cost assistance and down payment assistance. Horse also serves as a loan packager for USDA Rural Development, assisting prospective buyers with all of the paperwork to determine if they are eligible for the Direct or Guaranteed loans through the agency.