USDA (Rural Development)

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USDA Eligibility Requirements

Home buyers must be able to occupy the home after settlement, be a citizen(s) of the United States or have permanent residency. Co-borrowers who will not occupy the home are not permitted. In most cases, borrowers must sell their current home prior to closing on a USDA mortgage, if applicable.

Applicants must have adequate and dependable income. Prospective homebuyers are required to meet the income guidelines for the USDA loan. Annual income cannot be greater than 115% of the median income for the area, however, the USDA provides adjustments to income that exceed the limits (i.e. family size, childcare expenses for children age 12 or younger, etc.).

The applicant(s) should have a 24 month work history or adequate and dependable income. Qualifying income includes salary, hourly wages, documented tip income, re-occurring bonus, consistent overtime, alimony, and child support, etc.) received by the applicant and co-applicant(s)

The monthly debt (i.e. credit cards, installment loans, school loans, etc.) should not exceed 41% of the applicant(s) gross monthly income. The proposed mortgage payment with taxes and insurance is also included in the debt calculation. The monthly mortgage payment should not exceed 29% of the monthly income. The qualifying ratios are called debt to income. It should ne noted that the USDA permits some flexibility with the debt to income ratio with compensating factors, such as, good credit score, stable employment with the potential for increased earnings, and the ability to save.

Applicants may apply for a USDA home loan who do not have a credit score, however, the lender will attempt to determine an applicants’ credit worthiness with a 12 month history of rental or housing payments, utility payments, insurance payments, or payments to a retail store. The typical verification is made with cancelled checks or receipts.

Technically, the USDA loan program will accept credit scores below 580; however, most lenders require a 620 credit score.

An applicant’s credit history with any or all of the following derogatory credit is considered unacceptable to the USDA home loan program.

  • Multiple 30-day late within the previous 12 months
  • Personal bankruptcy or home foreclosure discharged less than 36 months,
  • Outstanding judgments within the past 12 months,
  • Two or more 30 day late rent payments within the past 3 years,
  • Open collection accounts with no payment arrangements,
  • Delinquent or outstanding tax liens, federal debt with no payment arrangements,
  • Credit accounts converted to collections in the past 12 months. 

USDA loan program does allow adverse credit waivers for mitigating factors

Benefits of a USDA loan?

The USDA loan program does not require a down payment. That’s right. Zero down payment . . . the seller is permitted to pay a large percentage of the homebuyer’s closing costs. What’s the catch? The home must be located in a designated rural area. USDA eligibility map

How much can I borrow?

The loan amount can be up to 100% of the sales price or appraised value (whichever is higher) plus the guarantee fee. Keep in mind that the maximum loan will be based on your monthly income and debts.

USDA Eligibility Requirements

Home buyers must be able to occupy the home after settlement, be a citizen(s) of the United States or have permanent residency. Co-borrowers who will not occupy the home are not permitted. In most cases, borrowers must sell their current home prior to closing on a USDA mortgage, if applicable.

Applicants must have adequate and dependable income. Prospective homebuyers are required to meet the income guidelines for the USDA loan. Annual income cannot be greater than 115% of the median income for the area, however, the USDA provides adjustments to income that exceed the limits (i.e. family size, childcare expenses for children age 12 or younger, etc.).

The applicant(s) should have a 24 month work history or adequate and dependable income. Qualifying income includes salary, hourly wages, documented tip income, re-occurring bonus, consistent overtime, alimony, and child support, etc.) received by the applicant and co-applicant(s)

The monthly debt (i.e. credit cards, installment loans, school loans, etc.) should not exceed 41% of the applicant(s) gross monthly income. The proposed mortgage payment with taxes and insurance is also included in the debt calculation. The monthly mortgage payment should not exceed 29% of the monthly income. The qualifying ratios are called debt to income. It should ne noted that the USDA permits some flexibility with the debt to income ratio with compensating factors, such as, good credit score, stable employment with the potential for increased earnings, and the ability to save.

Applicants may apply for a USDA home loan who do not have a credit score, however, the lender will attempt to determine an applicants’ credit worthiness with a 12 month history of rental or housing payments, utility payments, insurance payments, or payments to a retail store. The typical verification is made with cancelled checks or receipts.

Technically, the USDA loan program will accept credit scores below 580; however, most lenders require a 620 credit score.

An applicant’s credit history with any or all of the following derogatory credit is considered unacceptable to the USDA home loan program.

  • Multiple 30-day late within the previous 12 months
  • Personal bankruptcy or home foreclosure discharged less than 36 months,
  • Outstanding judgments within the past 12 months,
  • Two or more 30 day late rent payments within the past 3 years,
  • Open collection accounts with no payment arrangements,
  • Delinquent or outstanding tax liens, federal debt with no payment arrangements,
  • Credit accounts converted to collections in the past 12 months. 

USDA loan program does allow adverse credit waivers for mitigating factors

Benefits of a USDA loan?

The USDA loan program does not require a down payment. That’s right. Zero down payment . . . the seller is permitted to pay a large percentage of the homebuyer’s closing costs. What’s the catch? The home must be located in a designated rural area. USDA eligibility map

How much can I borrow?

The loan amount can be up to 100% of the sales price or appraised value (whichever is higher) plus the guarantee fee. Keep in mind that the maximum loan will be based on your monthly income and debts.