USDA Home Loans Offer Lower Fixed Interest Rates For Raleigh Residents

The USDA Rural Development Home Loan is a loan program that many prospective homeowners in the Raleigh area are not aware of but may be just want they are looking for. If your income is below the median income range and you are looking to purchase a home in a rural area this loan is perfect for you. It is a loan through VHDA - A Rural Housing Development loan.


This loan is a flexible zero down payment government guaranteed program that was established to help promote home ownership to those living in rural communities who have low to moderate incomes. Not only does this program offer a zero down payment, it also offers a 30-year term fixed rate mortgage of 3.25 percent. Many suburban areas outside of Raleigh qualify for this program.

The most common USDA rural housing loan is the Section 502 Guaranteed Loan. This loan allows borrowers the ability to receive up to 103.5% of the home’s appraised value and the opportunity to include closing costs in the loan itself. Borrowers will need a credit score of 640 or better to qualify for a USDA home loan. The Triangle home must be owner occupied and not an investment property. These loans are not allowed on manufactured or mobile homes.

USDA Home Loan example based on a $250,000 home price:

No down payment required vs. an FHA loan that requires a minimum 3.5 percent down payment, which would be $8,750.

An FHA loan will require you to pay an upfront mortgage insurance premium that is 1 percent of the loan amount. For a $250,000 home, you will be paying $2,412.50 due at closing. The USDA home loan has something similar that it calls a USDA Guarantee Fee. This fee is 3.5 percent so for this home loan scenario you would pay $8,750. This amount can be figured into your home loan, which is why the loan can be financed at 103.5%.


Total financed amount after the above scenarios are figured in:

FHA Home Loan = $243,662.50
USDA Home Loan = 258,750.00

Monthly Mortgage Insurance Payment:

An FHA loan will require annual mortgage insurance payment equal to 0.9% of the amount of the loan financed paid on a monthly basis. For the above scenario that would be equivalent to paying $182.75.

In contrast, the USDA Home Loan does not require any monthly mortgage insurance payments.
In the end, you will save more money with a USDA home loan as they offer lower interest rates and less monthly costs.

If you are interested in learning more about homes that qualify for a USDA loan, contact Rodney Geohagan. The Geo Team is here to help you with all of your real estate needs. Rodney Geohagan is a certified distressed property expert who has the experience to help you sell your home and is qualified to help you with all options before it is too late. There are many questions about how the short sale process works and whether a homeowner would be better off selling short or signing over their deed in lieu of foreclosure. Rodney has the answer and would love to sit down for a confidential review of your options.