RD Loans are Perfect for First Time Home Buyers in Iowa
According to a recent article by FreddieMac, housing preferences have “shifted towards larger homes that are more conducive to remote work and virtual learning. As a result, more and more people are moving to suburbs and rural towns.”
However, data suggests that this shift began long before the COVID-19 pandemic. The shift to rural home buying actually began in 2010 and has steadily increased to this day. Residential Mortgage Network has a home loan option specifically for Iowa buyers looking in these communities of 20,000 people or less that requires $0 down payment.
What is a USDA Rural Development Loan?
USDA loans in Iowa are available to buyers looking to purchase a home in a community with a population of 20,000 or less. This encompasses North Liberty, Tiffin, Swisher, Newton, Washington, Williamsburg, Solon, Grinnell and many, many more. There are eligible towns in all 99 Iowa counties!
Many Iowa buyers are eligible for this program, which makes it such a great option no matter the purchase price! To take advantage of the Rural Development Loan program, you must meet the following eligibility requirements:
- Occupy the home you’re purchasing as your primary residence
- Be a U.S. citizen or permanent resident
- Meet standard credit criteria (640 or better credit score)
- Make gross wages within the 2021 USDA Income Limits
The USDA 2021 Iowa income limits vary by county. If you live in Johnson County, the income limit is $114,850; for Linn County residents, it is $102,800. Don’t let the RD income limits scare you! There are some eligible monthly expenses that can be deducted. Let us calculate your income!
Home Condition Requirements
Some lenders discourage the use of the Rural Development loan because they say the home must be in “perfect condition.” That’s not true! There are a few requirements, but they are (in most cases) an easy fix or something that can be addressed up front. Some of these requirements include: chipped/peeling paint, bad roof or handrails on stairways.
The home condition requirements for a Rural Development loan are not “stricter” than any other program. Ultimately, the home you are buying should not have these issues by the time of your closing no matter what loan program you choose!
Fixed Rate Condo Financing with RD loans
Financing for a condo is different than financing for a single-family home or a zero lot line. For example, some lenders will only offer an adjustable rate mortgage (ARM) if you’re purchasing a condominium – which could cost you more in the long run!
You can finance with a fixed rate mortgage for a condominium with a Rural Development loan if the condo project meets program requirements. The majority of condo projects in our market meet the requirements and are eligible for approval. The lender you’re talking to needs to understand how you can get those condo projects approved, and they have to have the authority to submit them for approval. RMN has gotten hundreds, if not thousands, of condos approved all over the state of Iowa including in Johnson County, Linn County and surrounding areas. We understand how to approve the condos and how to fit the process into our timeline so that we do not miss any deadlines.
Will the home buying process take longer with an RD loan?
When it comes to RD loans, where you get your loan from DOES matter. Other lenders may discourage the program claiming that financing will take longer when that is simply not true. At RMN, we underwrite all of our loans in-house.
We are a mortgage bank, not a broker, meaning we are in complete control of the process from start to finish. We can simply walk down the hall to talk to our processors and our underwriters, so things get done immediately. There isn’t a better way to explain it – it is just that easy! Many other mortgage companies in Iowa can’t say the same.
Because of this, we are able to meet quick financing deadlines so your closing does NOT take longer with an RD loan. Most importantly, we aren’t scared of the program. We know how to get them done just like a conventional loan – we have literally done thousands of them.
First Time Home Buyer?
One of the biggest hurdles to home ownership is the down payment. That is why we often recommend the USDA Rural Development loan to an Iowa First Time Homebuyer. The RD loan requires $0 down payment. Yes, you read that right! Home ownership is attainable with this loan program if you are looking in eligible towns.
If you have money saved for a down payment, no problem! The RD loan is still a great option with some down payment for your first home purchase. However, some buyers who have saved up enough money for a down payment choose to keep the money and use it towards repairs/improvements or payoff other debt to make their house payment even MORE affordable.
Another reason we recommend this program to an Iowa First Time Homebuyer is because there is typically a lower interest rate compared to other loan programs. In fact, you can get 100% financing through the Rural Development program and still pay a lower interest rate than Conventional. There is a Guarantee Fee (a 1% fee financed into the loan plus a small monthly fee that reduces as you pay down your loan balance) included with 100% financing, which is similar to private mortgage insurance (PMI). However, with the lower, fixed interest rate of the RD loan, you’ll still come out ahead!
Additionally, a First Time Home Buyer will have a major advantage working with RMN. We make sure to answer all of our borrower’s questions and walk them through the entire process ensuring a smooth transaction.
Buying a Home with a Rural Development Loan
If you or anyone you know is looking to buy a home in an eligible area, then an Iowa Rural Development loan may be the right loan program for you! Please feel free to contact us or give us a call to discover your eligibility and get started today.