USDA loan credit requirements

Family sitting in front of homeThe USDA Loan Program, also known as the rural development home loan, is a 30 year fixed rate mortgage designed for home buyers with low to moderate income. The USDA home loans are mortgages backed by the United Department of Agriculture. The USDA does not actually lend the mortgage money to the home buyer, but provides default insurance to USDA approved lenders who offers the USDA home loans. The default insurance is a great incentive to lenders to provide mortgage money to home buyers who are unable meet the requirements for a traditional mortgage. The USDA home loan does not require a down payment, 100% financing. There are income limits with USDA mortgages and the house must be located in a designated rural location. Surprisingly, many areas across the United States are eligible for a USDA home loan. USDA Loan Calculator

Are there closing costs with USDA loans?

There are closing costs with the USDA home loan, just like any other mortgage; including title insurance, appraisal, transfer tax and mortgage tax stamps if applicable.

Are there income limits for USDA loans?

There are income limits with the USDA home loan, however, the income limits are very generous. The maximum income needs to be below 115% of the median household income adjusted for family size for the county where the home is located. The USDA provides a USDA Income Eligibility tool to help home buyers determine whether their income meets the USDA income requirement. Please understand that only a qualified loan officer can accurately determine income eligibility.

Are USDA loans for first time home buyers?

The USDA rural housing loan is available to first time home buyers and non-first time homebuyers.

Can you build a house with a USDA loan?

Yes! The USDA rural home loan program permits home buyers to build a new home; and, use 100% financing!

Do all banks offer USDA loans?

No. Lenders must be approved by the USDA to offer home buyers USDA financing. Some lenders who are not approved may try to talk you out of a USDA loan because the lender does not offer the progra.

Do USDA loans finance manufactured homes?

The USDA will finance a new modular home, provided it is permanently attached to a foundation, and is taxed as real estate.

On July 21, 2017, the USDA announced two manufactured housing pilot programs to allow financing to existing manufactured homes in a limited number of states. States currently participating in the pilot include: Colorado, Iowa, Louisiana, Nevada, New Hampshire, New York, North Dakota, Ohio, Pennsylvania, Texas, Vermont, Virginia, and Wyoming. The Rural Housing Service is now expanding the pilot to include additional states.

The loan request must be from an eligible applicant and all the pilot conditions must be met. To be eligible for financing under this pilot, existing manufactured homes (including new units which have been on the dealer’s lot in excess of 12 months) must meet the following pilot conditions in addition to all other program requirements that have not been waived.

The unit must have been constructed on or after January 1, 2006, in conformance with the Federal Manufactured Home Construction and Safety Standards (FMHCSS), as evidenced by an affixed Housing and Urban Development (HUD) Certification Label.

The manufactured home must be taxed and classified as real estate; the remaining economic life of the property must meet or exceed the 30 year term of the proposed mortgage loan;

The unit must not have had any modifications or alterations to it since construction in the factory. Read more

Do USDA loans have pmi?

The USDA home loans have an "upfront" mortgage insurance premium of 1% of the loan amount. For example, if the loan amount is $100,000, the upfront mortgage insurance cost would be $1,000 ($100,000 X 1% = $1,000). The mortgage insurance can be paid in cash at settlement or financed with the loan.

In addition to the initial mortgage insurance requirement, the USDA also charges a monthly premium as part of the mortgage payment. The monthly cost is .35% of the loan amount. Another example, multiply the loan amount of $100,000 X .0035 = $350. Now divide $350 by 12 months for the monthly mip (pmi) cost of $29.17.