October is a spooky month that is filled with creepy crawlies and ghoulish figures. These are the types of scares we expect but in the mortgage lending field, often times we see people who have had scary experiences based on choosing inexperienced lenders or following the wrong advice on USDA rural housing loans.

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Top 5 Misconceptions about USDA Rural Housing Loans


  1. USDA Rural Housing Loans take longer to close.

Ok, so this one is not a misconception. It is true that USDA rural housing loans take longer to close than traditional loans. This is because the loan is federally backed, and federally funded so anything that goes through the US Government typically takes longer than when funding comes from private funders. However, the USDA rural housing loan process could be prolonged by working with a lender who is unfamiliar with the USDA Rural Housing Loan program and the very specific requirements on income eligibility, income limits and property eligibility.

  1. USDA Rural Housing Loans are only for First Time Homebuyers.

False! USDA Rural Housing Loans are not restricted by previous home ownership. As long as your income has been determined as eligible and the property you apply to the program with is eligible you may apply for the USDA rural housing loan.

  1. You cannot refinance USDA Rural Housing Loans.

Again, false! In fact, the USDA now offers an exceptional refinancing option under the USDA Rural Refinance Pilot Program. So yes, if you have a USDA rural housing loan you are absolutely eligible to refinance. The catch is that you are not able to do a cash-out or cash-back refinance. You are only allowed to refinance your mortgage into a lower interest rate.

  1. USDA Rural Housing Loans are only available in farming communities.

USDA rural housing loans are not just for houses in farming communities. The USDA is always expanding which properties are considered eligible and which are not. While it’s true that homes in urban areas will most likely never be considered eligible for USDA rural housing loans, there are nice communities just a short drive outside of these urban areas that are eligible. Be sure to work with a lender who can help guide you, and save you time from searching for a home in areas that are not eligible for USDA rural housing loans.

  1. If you exceed income eligibility after closing you could lose your home.

It is true that the income limits set forth by the USDA are not flexible, however; if you were to receive a raise after you’ve closed on a USDA rural housing loan you would not be in jeopardy of losing your home. However, if you were to receive a raise between your initial USDA rural housing loan application and closing, that increase in income could potentially push you outside of the income limits set forth by the USDA for USDA rural housing loans. As with any home loan, it is exceedingly important to have no significant changes to your finances, income, or spending while your loan is being processed. Talk with a trusted lender to learn more about the importance of maintaining your financials as they were with your initial loan application.

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