 USDA Home Loans
What is a USDA Home Loan?
USDA is short for the United States Department of Agriculture and RD is short for Rural Development. The USDA RD program offers several mortgage loan options that could be a good fit for you if you are looking to buy a new home with no down payment.
What loan programs are offered by USDA Rural Development?
There are a couple of USDA mortgage loan programs available today for single family buyers:
 USDA Guaranteed Loan Program
The USDA RD Guaranteed Loan Program is the most popular type of USDA RD Loan because it enables borrowers with moderate or higher income to obtain up to a 100% LTV mortgage for their home purchase. Those that apply for a USDA Guaranteed Loan are permitted to have taxable income of up to 115% of the median household income set for their county. All area income limits for USDA home loans in the U.S. can be accessed here. USDA RD Guaranteed Loans are 30 year fixed-rate mortgages.
USDA Direct Loan Program
USDA RD Direct Mortgage Loans are issued on a more limited basis than USDA Guaranteed Mortgage Loans. These loans are intended for low and very low income households to buy a new home,. Very low income is defined by USDA as below 50 percent of the area median income (AMI); low income is defined by USDA as between 50 and 80 percent of AMI; moderate income is defined by USDA as 80 to 100 percent of AMI. Area income limits for this program can be viewed here.
How do USDA Home Loans compare to Conventional Loans?
USDA loans give buyers several advantages that can't be found in other mortgage programs:
USDA Home Loans carry flexible credit guidelines.
USDA mortgage loan requirements aren't totally driven by a borrowers credit score. It is possible for a borrower to be approved with FICO scores as low as 620.
USDA Home Loans offer 100% financing.
USDA Mortgages don't require any money down to purchase a home. They are the only program available in America today that offer zero-down mortgages for those that are not military veterans.
What are factors determine if I am approved for a USDA Loan?
Your income and expenses will be considered. To qualify, your monthly housing costs (mortgage payment principal and interest, property taxes and homeowners insurance) can not exceed 29% percent of your gross monthly income (29% "Top Ratio"). Borrowers will also need enough income to pay for housing costs plus enough to cover all additional monthly debt obligations (41% "Bottom Ratio"). These ratios may be exceeded slightly with compensating factors like a credit score higher than 660. USDA Home Loan applicants may be approved with an income of up to 115% of the area median income. The USDA Guaranteed RD Loan limits for income in your area can be viewed here. The USDA Direct RD Loan limits for income in your area can be viewed here. Your credit rating and history will also be reviewed to determine if you meet USDA requirements for approval.. For approval through most lenders, all applicants must have a FICO credit score of 620 or above.
Learn more about USDA Mortgage Requirements.
How much can I borrow with a USDA Loan?
Maximum loan amounts for USDA home loans are determined by:
Maximum USDA Loan Amounts: While there is no set maximum loan amount for USDA home loans, the borrower's total monthly household income must be at or below the maximum allowed USDA income limits for the area the property is located. USDA RD Guaranteed Home Loan income limits for the entire U.S. can be viewed here. In addition to the maximum income limitations, the minimum debt-to-income ratios will also apply to determine how much home you can afford (29% and 41% debt-to-income ratios).
Maximum USDA loan-to-value financing: The maximum amount that can be financed with a USDA Home Loan amount is 102% percent of the total appraised value of the property, which equals 100% percent of the sales price plus the 2% guarantee fee.
Do USDA Loans require money for a down payment or closing costs?
USDA Mortgage loan programs don't require any money down and closing costs may be rolled into the loan amount it the property appraisal permits.
What types of property are eligible for a USDA Home Loan?
USDA Mortgage Guidelines require that the subject property be occupied by the owner. Eligible property types include new homes, existing homes, condos, and new manufactured homes.
Am I eligible for a USDA Loan after bankruptcy?
USDA loan approval criteria states that if you have a Chapter 7 bankruptcy in your past, it must have been discharged for at least three or more years to be approved for a USDA RD Loan. If you have a Chapter 13 bankruptcy in your past and you have made all court appointed obligations as agreed and on time for a period of at least one year, you may also be eligible for USDA loan approval.
Find out more on USDA Loans.
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