About USDA Rural Mortgages:
USDA stands for the United States Department of Agriculture. Rural Mortgages could be right for your circumstances if you’re unsure about your credit rating or have concerns about a down payment.
What rural mortgages does USDA offer?
Currently, there are two kinds of USDA rural housing mortgage loans available for the purchase of single family house loans:
USDA Guaranteed Rural Development Mortgage
USDA Guaranteed Mortgages are the most common type of USDA rural mortgage and allow for higher income limits and 100% financing for home purchases. USDA Guaranteed rural housing mortgage applicants may have an income of up to 115% of the median household income for the area. Area income limits for this program can be viewed here. All USDA Guaranteed Loans carry 30 year terms and are set at a fixed rate.
USDA Direct Rural Development Mortgage
USDA Direct Housing Loans are less common than USDA Guaranteed Loans and are only available for low and very low income households to obtain home ownership, as defined by the USDA.
What factors determine if I am eligible for a Rural Housing Mortgage?
To be eligible for an USDA Mortgage Loan, your monthly housing costs (mortgage principal and interest, property taxes, and insurance) must meet a specified percentage of your gross monthly income (29% ratio). Your credit background will be fairly considered. At least a 620 FICO credit score is required to obtain an USDA approval through most lenders. You must also have enough income to pay your USDA rural development mortgage payment plus all additional monthly debt (41% ratio). These ratios can be exceeded somewhat with compensating factors. Applicants for loans may have an income of up to 115% of the median income for the area. Maximum USDA Guaranteed Loan income limits for your area can be found athere. Maximum USDA Direct Loan income limits for your area can be found at here. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance.
See more on USDA Mortgage Requirements.
What is the maximum amount that I can borrow?
The maximum amount for a rural mortgage is determined by:
Maximum mortgage amount: The is no set maximum loan amount allowed for an USDA rural mortgage. Instead, your debt-to-income ratios will dictate how much home your can afford (29/41 ratios). Additionally, your total household monthly income must be within USDA allowed maximum income limits for your area. Maximum USDA Guaranteed Loan income limits for your area can be found at here.
Maximum financing: The maximum USDA Rural Development mortgage amount will be 102% of the appraised value of the home (100% plus the 2% USDA loan guarantee fee).
How are rural mortgage down payment and closing costs?
Are you curious what is the minimum down payment for an USDA Rural Loan? USDA Mortgage Loans require no down payment and they allow for the closing costs to be included in the loan amount (appraisal permitting).
What property types are allowed for rural mortgages?
USDA Mortgage Guidelines do require that the property be Owner Occupied and they allow the purchase of condos, planned unit developments, manufactured homes, and single family residences.
Those who already purchased a home with a rural loan are also eligible for a USDA refinance mortgage.
Learn more about Rural Mortgages.