About USDA loans - 100% financing!

USDA home buyers standing in front of their new homeHow do I apply for a USDA guaranteed loan?

The Department of Agriculture works with approved mortgage companies and banks to originate USDA home loans. USDA home loan lenders

How do you qualify for a USDA loan?

Qualifying for the USDA rural housing loan program is similar to other mortgage programs. Applicants must have a two year work history, reasonably good credit, and meet the income limits.

  • Agree to personally occupy the dwelling as their primary residence
  • Be a U.S. Citizen, U.S. non-citizen national or Qualified Alien
  • Have not been suspended or debarred from participation in federal programs
  • Have the legal capacity to incur the loan obligation
  • Purchase a property that meets all program criteria

What are the USDA credit score requirements?

There is no minimum credit score with USDA home loans, however, most lenders will require at least a 620 credit score.

According to the USDA:
USDA applicants should have a credit history that indicates a reasonable ability and desire to meet their credit obligations as they become due. A credit history indicating any or all of the following is considered unacceptable credit history:

No more than one thirty day late during the past 12 months.
No foreclosure or bankruptcy less than 36 months old No open judgments within the past 12 months
Two or more rent payments that were 30 days late within the past three years.
Outstanding collection accounts with no payment arrangements
Outstanding delinquent federal debt or tax liens with no payment arrangements
No credit accounts converted to collections in the past 12 months

What homes are eligible for USDA loans?

Homes must be located in a targeted rural area. Many people think that the USDA home loan is only available for very remote areas. But, it's not uncommon to find homes that are eligible for a USDA loan just outside a suburban area. USDA home loan map

Who is eligible for a USDA home loan?

Home buyers must be able to occupy the house after settlement, be a citizen(s) of the United States or have permanent residency. Co-borrowers who will not occupy the house are not permitted. In most cases, borrowers are required to 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.