USDA Home Loans
About USDA Home Loans:
“USDA” is short for the United States Department of Agriculture and “RD” is short for Rural Development. USDA RD offers several home loan options that could be a good fit for those looking to buy a new home with no down payment. USDA Home Loan interest rates are very competitive with other loan programs.
What home loan programs are offered by USDA Rural Development?
There are a couple of popular USDA home loan programs available today for single family buyers:
USDA Guaranteed Home Loan
The USDA RD Guaranteed Loan Program is the most popular type of USDA Loan because it enables borrowers with moderate or higher income to obtain up to a 100% LTV for their home purchase. Those that apply for a USDA Guaranteed Loan are allowed 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. Guaranteed USDA Rural Home Loans are 30 year fixed-rate mortgages.
USDA Direct Home Loan
USDA RD Direct Mortgage Loans are issued on a more limited basis than USDA Guaranteed Mortgage Loans. These loans are intended to assist low and very low income households get a zero down mortgage loan. Very low income is defined by USDA home loans guidelines 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 home loans requirements 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 Rural 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 loan qualifications 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. And USDA home loan rates are typically less than or equal to conforming loan rates.
What are factors determine if I am approved for a USDA Home Loan?
Your income and expenses will be considered for USDA home loan eligibility. 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 program 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 be borrowed with a USDA Home 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 loan guidelines, 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 USDA Rural Home Loans 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 Home Loans require money for a down payment or closing costs?
USDA Mortgage loan programs don’t require any money for a down payment 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 Loans?
USDA Home Loans 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 approval by current USDA home loan requirements.
Find out more on USDA Home Loans.