Rural development loans have strict guidelines, particularly with regard to the condition of the home and how it has been built (for the health and safety of the buyer). Mostly you have to purchase a newer home because of those guidelines. Another thing is that the home must be located in an area which is "rural" or in a town of less than 20,000 people.
An "RD" loan has the advantage that if you can get the seller to pay closing costs on your behalf, you can esssentially get a "zero down" loan with minimal cost on your part.
You find the home in the same way that you find any other home to purchase. Find a reputable buyer agent (real estate agent) who will help you find a home which meets all of the guidelines. The buyer agent will also guide you through the transaction and represent your interests in the transaction. You can also search homes on the internet in your local area. But I would suggest that you also use a buyer agent. In most parts of the country there is no extra cost to you if you will be purchasing a home which is listed with a realtor.
The other thing to do is to find a good lender who has experience with this type of loan. Your realtor may be able to make some recommendations in this regard. USDA probably has some of the guidelines on their website, but talking to a knowledgeable lender can be useful for determining what areas where you live qualify.
If you will be purchasing a home in a city over 20,000, you can't use a rural development loan. Another alternative is an FHA loan where you only have to pay 3% of the purchase price of the home. If you can get the seller to agree to pay closing costs on your behalf, then your 3% down payment goes towards equity in the home instead of for paying closing costs. Your buyer agent and lender can guide you in this regard.
Depending on home prices where you are located and the amount of money you qualify for, if you will be purchasing an older home which needs some work, there is another FHA program which may serve your needs. It's the 203K program, which gives you money to make repairs and upgrades as well as pay for the home. This type of loan used to be kind of clunky (much red tape) so almost no banks did them, but the process has recently been streamlined so it is much easier. However, few loan originators have experience with this type of loan, so you need to try to find a specialist who has done these.
Good luck and happy home hunting.
· 1 decade ago