USDA
Single Family Housing Guaranteed Loan Program
No down payment loans for rural borrowers with incomes below
115 percent of area median income as dened by USDA
BACKGROUND AND PURPOSE
The U.S. Department of Agriculture’s (USDA)
Single Family Housing Guaranteed Loan Program
(Guaranteed Loan Program) is designed to serve eli-
gible rural residents with incomes below 115 percent
of area median income or AMI (see USDA denition in
overview) who are unable to obtain adequate hous-
ing through conventional nancing. Guaranteed Loans
are originated, underwritten, and closed by a USDA
approved private sector or commercial lender. The
Rural Housing Service (RHS) guarantees the loan at
100 percent of the loss for the rst 35 percent of the
original loan and 85 percent of the loss on the remain-
ing 65 percent. The program is entirely supported by
the upfront and annual guarantee fees collected at the
time of loan origination.
BORROWER CRITERIA
Income limits: This program is limited to borrowers
with incomes up to 115 percent of AMI (as dened by
USDA). Approximately 30 percent of Guaranteed Loans
are made to families with incomes below 80 percent of
AMI. An applicant must have dependable income that
is adequate to support the mortgage.
Credit: Borrowers must have reasonable credit his-
tories and an income that is dependable enough to
support the loans but be unable to obtain reasonable
credit from another source.
First-time homebuyers: If funding levels are limited
near the end of a scal year, applications are prioritized
to accommodate rst-time homebuyers.
Occupancy and ownership of other properties: The
dwelling purchased with a Guaranteed Loan must be
PROGRAM NAME
Single Family Housing Guaranteed Loan Program
AGENCY
U.S. Department of Agriculture’s Rural Housing Service
EXPIRATION DATE
Not Applicable
APPLICATIONS
Contact your local Rural Housing Service ofce: http://www.rd.usda.gov/contact-us/state-ofces
WEB LINK
https://www.rd.usda.gov/programs-services/single-family-housing-guaranteed-loan-program
CONTACT
INFORMATION
Contact your local Rural Housing Service ofce: http://www.rd.usda.gov/contact-us/state-ofces
APPLICATION PERIOD
Continuous
GEOGRAPHIC SCOPE
Rural areas: To determine whether a property is in an eligible area, see
https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp
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the borrower’s primary residence. A borrower may be eligible to retain a
current dwelling if it no longer meets the household’s needs. The dwell-
ing that the borrower is retaining, if applicable, may not be nanced
with a USDA Guaranteed or Direct loan.
Special populations: If funding levels are limited, applications are priori-
tized to accommodate rst-time homebuyers and veterans.
Special assistance for persons with disabilities: Special design features
or permanently installed equipment to accommodate a household
member who has a physical disability may be nanced into the loan.
Property types and allowable costs:
• Existing homes must meet minimum property standards as estab-
lished in the current U.S. Department of Housing and Urban
Development (HUD) Handbook.
• New dwellings must meet an acceptable building code.
• There are no restrictions on size or design.
• New manufactured homes are eligible. Existing manufactured
homes are not eligible unless the home is already secured with a
USDA Direct or Guaranteed mortgage. Manufactured homes have to
be considered real property under the applicable jurisdictional laws.
• Necessary interior and exterior repairs that together with the pur-
chase price do not exceed the appraised value of an existing home
may be included in the loan.
• Reasonable and customary lender fees, connection fees, assess-
ments, establishment of an escrow account for the payment of real
estate taxes and insurance, and other eligible costs may be nanced.
• Purchase and installation of energy efciency measures (e.g., insula-
tion, double-paned glass, and solar panels) is an allowable cost.
• Installation of xed broadband service to the household is an allow-
able cost as long as the equipment is conveyed with the dwelling.
• Site preparation costs, including grading, foundation, plantings,
seeding or sod installation, trees, walks, fences, and driveways are
allowable costs.
Other: Applicants must meet U.S. citizenship or eligible nonciti-
zen requirements.
LOAN CRITERIA
Loan limits: Loan limits do not apply.
Loan-to-value limits: The loan-to-value ratio may be up to 100 percent
of appraised value and upfront funding fee, as long as there is no cash
out to the borrower.
POTENTIAL BENEFITS
USDA Single Family Housing
Guaranteed Loans may allow
community banks to expand their
customer base among borrow
ers in rural communities with
incomes below 115 percent of
AMI (as defined by USDA).
USDA offers up to a 90 per
cent guarantee.
Single Family Housing
Guaranteed Loans offer competi
tive pricing and terms.
Loans originated through USDA
may receive favorable consider
ation under the CRA, depending
on the geography or income of
the participating borrowers.
POTENTIAL CHALLENGES
Community banks must be
approved by USDA to lend under
this program, and they may need
to acquire or develop new exper
tise and infrastructure in order
to participate.
Community banks must have
access to the secondary market
to use this program.
Eligibility for this program is
limited by geographic constraints
and income limits. Borrowers
must have reasonable credit
histories and an income that
is dependable enough to sup
port the loans, but be unable
to obtain affordable credit from
another source.
FDIC | Affordable Mortgage Lending Guide | 52
Down payment sources: No down payment is required.
Applicants may use down payment assistance
programs to assist with the down payment and/or pay-
ment of closing costs/fees.
Homeownership counseling: Counseling is not
required but encouraged. The individual lender can
require homeownership counseling.
Mortgage insurance: USDA charges guarantee fees
that act as mortgage insurance, similar to the Federal
Housing Administration (FHA). However, they are
called “Guarantee Fees” not mortgage insurance in
documentation. Where “insurance” appears in the Rural
Housing Service’s documentation, it refers to home-
owner’s insurance. The Rural Housing Service charges
the lender a one-time upfront guarantee fee of up to
3.5 percent of the total loan amount. An annual fee of
up to 0.5 percent also applies for the life of the loan.
The lender may pass these fees on to the borrower and
may nance them in the loan.
Debt-to-income ratio: Baseline ratios for the program
based on gross monthly income are 29 percent for the
principal, interest, real estate taxes, and insurance (PITI)
and 41 percent for the total debt, which is the PITI plus
additional recurring monthly debts. In the event the
borrower has student loan debt and is not yet in repay-
ment, as is the case for current students, USDA’s policy
is to include 1 percent of the total student loan balance
in the debt-to-income calculation, and to not lend to
current students unless there is a reasonable likelihood
that they will remain in the home after graduation.
Temporary interest rate buy downs: Borrowers must
qualify at the full note interest rate, but temporary inter-
est rate buy downs are allowed.
Renance: Renance is allowed for current Guaranteed
Loans or Direct Loans. Non-USDA loans are ineligible
to be renanced into the Guaranteed Loan program.
Interest rate: Fixed interest rates are negotiated
between the lender and applicant. The interest rate
may not exceed the Fannie Mae 30-year, 90-day rate
plus 1 percent and rounded up the nearest .25 per-
cent on the day locked. Adjustable-rate mortgages,
balloons, interest-only, and other loans are not eli-
gible options.
Term: Loans must have 30-year amortization terms.
Secondary market: Loans are acceptable to Fannie
Mae, Freddie Mac, and Ginnie Mae.
Guarantee: Rural Housing Service guarantees the
lesser of 90 percent of the original principal amount
actually advanced to the borrower; or 100 percent of
any loss equal to or less than 35 percent of the original
loan and 85 percent of any remaining loss up to 65
percent of the principal advanced.
Potential Benets
• USDA Single Family Housing Guaranteed Loans
may allow community banks to expand their cus-
tomer base among borrowers in rural communities
with incomes below 115 percent of AMI (as dened
by USDA).
• USDA offers up to a 90 percent guarantee.
• Single Family Housing Guaranteed Loans offer
competitive pricing and terms.
• Loans originated through USDA may receive favor-
able consideration under the CRA, depending
on the geography or income of the participat-
ing borrowers.
Potential Challenges
• Community banks must be approved by USDA to
lend under this program, and they may need to
acquire or develop new expertise and infrastruc-
ture in order to participate.
• Community banks must have access to the second-
ary market to use this program.
• Eligibility for this program is limited by geographic
constraints and income limits. Borrowers must
have reasonable credit histories and an income
that is dependable enough to support the loans,
but be unable to obtain affordable credit from
another source.
• The servicer must have an escrow system for taxes
and insurance.
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SIMILAR PROGRAMS
• USDA Single Family Housing Direct Loans
• VA Home Purchase Loan Program
• FHA 203(b) Mortgage Insurance Program
RESOURCES
Direct access to the following web links can be found at https://www.
fdic.gov/mortgagelending.
Area and county loan limits
https://www.rd.usda.gov/les/RD-SFHAreaLoanLimitMap.pdf
Minimum property standards
https://www.hud.gov/program_ofces/housing/ramh/mps/mhsmpsp
International building code adopted throughout most of the United States
http://www.iccsafe.org/codes-tech-support/codes/2015-i-codes/ibc/
Property rural status and eligibility
http://eligibility.sc.egov.usda.gov/
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