USDA Loan Requirements

What are the USDA loan requirements?

To decide if you meet today’s USDA loan eligibility requirements, the following factors will be looked at:

  • Your income and your monthly expenses. Standard debt-to-income ratios are 29/41 for USDA Loans. These ratios may be exceeded with compensation factors.
  • Your credit history (this is important, but USDA’s credit standards are flexible). A FICO score of 620 or above is required for all borrowers through most lenders.
  • Your overall pattern rather than to individual problems you may have had.

To be eligible for USDA mortgage guidelines, it’s important to ask yourself “how much mortgage can I afford“.  For starters, your monthly housing costs (mortgage principal and interest, property taxes and insurance) must meet a specified percentage of your gross monthly income (29% ratio).  You must also have enough income to pay your new housing costs plus all additional monthly debt (41% ratio). These percentages may be exceeded with compensating factors.  Your credit background will be considered. At least a 620 FICO credit score is usually required to get a USDA approval through most lenders.  Applicants for loans may have an income of up to 115% of the median income for the area.  Maximum USDA 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.

Can I get a USDA loan after bankruptcy?

Criteria for USDA loan approvals state that if you have been discharged from a Chapter 7 bankruptcy for three years or more, you are eligible to apply for an USDA mortgage. If you are in a Chapter 13 bankruptcy and have made all court approved payments on time and as agreed for at least one year, you are also eligible to make a USDA Loan application.

What are USDA loan down payment requirements?

USDA Mortgages have no down payment requirement. Most other loan programs don’t allow this unless you are a military veteran.

What types of property are eligible?

While USDA Mortgage Guidelines do require that the property be Owner Occupied (OO), they do allow you to purchase condos, planned unit developments, manufactured homes, and single family residences.  The property must be located in an approved rural area, as defined by the USDA.  USDA Rural Development provides a website to check the eligibility of individual property addresses.

How much can I can borrow?

The maximum amount for an USDA Mortgage Loans are determined by:

Maximum loan amount: The is no set maximum loan amount allowed for a USDA Loan. 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 loan guidelines and the allowed maximum income limits for your area. Maximum USDA Loan income limits for your area can be found at here.

Maximum financing: The maximum USDA Mortgage amount will be 100% of the appraised value of the home.

What kinds of loans does USDA offer?

Fixed rate loans – All USDA loans are fixed-rate mortgages. In a fixed rate mortgage, your interest rate stays the same during the whole loan period, normally 30 years. The advantage of a fixed-rate mortgage is that you always know exactly how much your monthly payment will be, and you can plan for it.

What is considered a rural area by USDA loan guidelines?

Rural areas include open country and places with population of 10,000 or less and—under certain conditions—towns and cities. There is an automated rural area eligibility calculator at:  http://eligibility.sc.egov.usda.gov.