If you are looking for information on the USDA Home Loan offered through USDA Rural Development you’ve landed in the right place. This particular loan program seems to have many names. It is often called the USDA Rural Home Loan or Guaranteed Home Loan. No matter the name it all comes from the same place and has the same requirements. 100% financing is the cornerstone of USDA financing. Other than VA Mortgages which only Veterans can apply for, USDA home mortgage is the only other 100% option out there. We will go over most USDA loan guidelines.
USDA Mortgage Eligibility
To be eligible, applicants must:
- Have an adequate and dependable income.
- Be a U.S. citizen, qualified alien, or be legally admitted to the United States for permanent residence.
- Have an adjusted annual household income that does not exceed the moderate income limit established for the area. A family’s income includes the total gross income of the applicant, co-applicant and any other adults in the household. Applicants may be eligible to make certain adjustments to gross income— such as annual child care expenses and $480 for each minor child—in order to qualify. Here is an automated USDA income eligibility calculator for USDA to help out.
- Have a credit history that indicates a reasonable willingness to meet obligations as they become due.
- Have repayment ability based on the following ratios: total monthly obligations / gross monthly income cannot exceed 41%.
What is a USDA Mortgage, and what makes this program better than other programs that offer a low down payment?
USDA loans are a fixed rate mortgages with 30-year full amortizations, which provides for a stable payment over the life of the loan, thus giving the borrower security. USDA loans DO have a small monthly MI payment.
What is the downside to a USDA mortgage?
Whenever you are looking for a home that will fit within the guidelines on a USDA loan, it’s important you understand the eligibility because it does have some caveats.
Nothing financially, but USDA loans are just a bit geographically and income restrictive when compared to other mortgage products on the market.
Typically towns on the outskirts of larger cities and less than 30,000 residents apply, however you would be surprised where the areas are. In many cases, there are eligible areas in ineligible counties! Please click this link property eligibility and begin your search.
Income limits aren’t restrictive and are based on the total projected income for all adults living in the household. This income limit varies between counties. Please click on this link income eligibility to find the income limits for your particular area.
USDA Homes That Qualify
- Guaranteed loans can be made on either new or existing homes; Existing homes must be structurally sound, functionally adequate, and in good repair. There are no restrictions on the size or design of the home financed.
- The home must not be used for income-producing purposes; aka Farm or Ranch agricultural exempt properties.
- Homes must be located in rural areas. Rural areas include open country and places with a population of 10,000 or less and—under certain conditions—towns and cities with between 10,000 and 25,000 residents.
Highlights of the USDA Guaranteed Rural Housing Loan Program
- Loans may be for up to 100 percent (102 percent if the guarantee fee is included in the loan) of appraised value or for the acquisition cost, whichever is less.
- No down-payment is required.
- Mortgages are 30-year fixed rate at market interest rates.
- Loans may include funds for closing costs, the guarantee fee, legal fees, title services, cost of establishing an escrow account and other prepaid items, if the appraised value is higher than sales price. Sellers may contribute to the buyer’s closing costs.
- Home buyers make application with participating lenders.
- Buyers must personally occupy the dwelling following the purchase.
- Loans may be made to refinance either existing USDA Rural Development Guaranteed housing loans or our Section 502 Direct housing loans.
- For purchase loans, a one-time guarantee fee is charged to the lender.
Are you Eligible for USDA?
Before you begin anything, it’s always a good idea to check your eligibility. It’s fast, free, and takes less than 30 seconds.