How to Apply for Rural Development Loan? Take a 30-Sec Quiz

how to apply for rural development loan
  • You can apply for a USDA loan online, through your local USDA office or a loan application packager.
  • The USDA will only process your application once you submit all the requirements.
  • Income and credit history can influence the outcome of your loan application.
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Many Americans are ecstatic to own their own home, only to run into one roadblock after another once they apply for a USDA loan. It can be confusing and seem tedious at first if you don’t know the right steps to take in your application.

In this article, we will give you step-by-step instructions on how to apply for a USDA rural development loan and other information you need to get that application submitted successfully!

How to Apply for USDA Loan Online

Applying for a USDA loan is now easier and more convenient.

As a Direct USDA mortgage lender, you can check your eligibility on our website in under 30 seconds. It’s fast, free, and you’re under no obligation!

Once pre-approved, you can begin the formal loan application process where we’ll get in touch to make sure we answer all your questions and ask a few of our own. This is part of the pre-qualification process.

After that, we’ll send you your Pre-Approval letter and you’re on your way to finding the home of your dreams.

To qualify for a USDA construction loan, the property must be located in a designated rural area, and the borrower must have a moderate income and good credit history.

Additionally, the construction project must be for a primary residence and must meet certain building and energy efficiency standards. The loan can be used for both new construction and for remodels and renovations of existing homes.

How to Apply for a USDA Direct Loan

Applicants can also go for the traditional route. You can visit your local Rural Development office to start the process.

Pre-Qualification Process

If you know how USDA loans work, you may be familiar with the pre-qualification process. For USDA direct loans, this is an optional step.

Here’s what you can expect during this process:

A Rural Development staff member will look at your documents to check eligibility.They will not verify the documents, so the outcome may not be accurate.
You can determine if you are eligible for a USDA direct loan.The results of pre-qualification are non-binding. It will not influence your loan application.
If you are ineligible, you can receive counseling on how to improve your application.You might lose confidence in applying for a USDA loan.
You can still proceed with the loan application regardless of the outcome.This step adds more time to your application process.

Formal Application Process

If you’re ready to apply for a USDA direct loan, here’s what you’ll need to do.

  1. Request an application package from your local Rural Development office. This includes Form RD 410-4, Attachment 3-D, Attachment 3-J, and other relevant forms.
  2. Submit your application. You can submit it manually or through eForms. You can also use the services of a loan packager.
  3. The USDA will create a case file and process your application.
  4. Once all requirements are complete, they will enter your application to UniFi. The system will verify your information and determine eligibility.
  5. They will release an official decision. You will get a Certificate of Eligibility which indicates the maximum loan amount. You can use this to make an offer on a home.
  6. The underwriting process will determine if both applicant and the property meet the requirements.
  7. The last step will be loan approval and closing. You can now move into your dream home!

USDA Direct Loan Qualifications

usda direct loan qualifications

You can qualify for a USDA direct loan if you fall in the low-income or very-low-income bracket.

This means your annual household income falls within 50% to 80% of your area’s median income.

In addition, you must:

  • Currently not have your own home
  • Unable to get a conventional loan from lenders
  • Be of legal age
  • Meet citizenship requirements (U.S. citizen, non-citizen national, or qualified alien)
  • Not be disqualified from federal programs
  • Has no outstanding judgments from federal court
  • Has no major delinquencies in the last 36 months (bankruptcy, foreclosure, debt)

USDA Direct Loan Requirements

Unlike FHA loans, USDA loans offer 100% financing. To lessen the default risk, they must establish that you are able and willing to repay the loan.

They will look at 2 major areas: your credit history and income.

Credit History

The USDA will look at your credit history for the past three years. A credit score of 620 or higher can show that you can meet your financial obligations.

The USDA will look for alternative credit tradelines if you have low credit or no credit history. You can show that you have been making at least 12 monthly payments on the following:

  • Rent
  • Utilities
  • Insurance premiums
  • Child care
  • School tuition fees
  • Personal loans


The USDA will also evaluate your current income, debts, and assets. This is to see if you have the funds for monthly mortgage payments.

They want to see that you have had stable employment for the last two years. They also want to check your potential repayment income for the next two years.

The USDA will also look at your debt-to-income ratio. Your debt payments must not exceed 41% of your monthly income to qualify.

Your income will influence your loan terms. This includes interest rates and payback periods. It can also determine if you qualify for payment assistance programs or subsidies.

Later, you can also opt to refinance your loan to take advantage of lower rates. Refinancing doesn’t require new inspections or calculations. However, you must show that you have made mortgage payments for the last 12 months.

If you have questions about income requirements, do not hesitate to get in touch with us.

USDA Direct Loan Guidelines for Properties

Applicants must also ensure that their home meets the following guidelines:

  • Located in an eligible rural area
  • Size must not exceed 2,000 square feet
  • Value must not exceed the area loan limit
  • Home must be a primary residence, not an income-generating property

The same guidelines apply if you repair, renovate, relocate, or build your home.

Get Your USDA Rural Development Loan Approved Faster

Applying for a USDA rural development loan is a tedious process, and there’s no other way of going about it. You must be thorough with your loan documents to ensure that all the information is accurate. Even a tiny mistake can jeopardize the outcome of your loan application.

It also helps to know the step-by-step process of applying for a USDA loan. The more prepared you are, the less time you waste going back and forth to submit documents. This delays the time it takes to get your dream home.

If you want your loan application to be as efficient as possible, feel free to contact us. From preparing loan documents to finalizing your home loan, we can assist you at every step!

Frequently Asked Questions

Do USDA Loans Have Low Interest Rates?

USDA home loans make it easier for low-income borrowers to buy their own home. Interest rates can be as low as 1% if you qualify for payment assistance. Very-low-income borrowers can also extend their payback periods to 38 years.

Can I Get a USDA Loan With a 550 Credit Score?

The USDA offers flexibility when it comes to credit scores. Even if your credit score is below 620, you can still qualify for a USDA direct loan. What’s important is to show creditworthiness. You can do that by establishing alternative credit tradelines along with stable income.

Is a USDA Loan Worth It?

USDA loans are one of the best paths to homeownership. You can get 100% financing to buy or build your dream home if you meet the eligibility requirements. Since the USDA guarantees or funds your loan, you can also get lower interest and mortgage rates.