The word ‘rural’ may sound off-putting at face-value. When you think “rural” you think of Famers and cows.
However, what if I told you that 97% of the country is eligible for the USDA loan Program?
Sounds crazy, doesn’t it?
But, it’s true.
Look at the latest USDA eligibility map below. Everything in green is eligible. Those little blue specs are areas that are ineligible.
USDA Eligibility Map
The current U.S. department of agriculture eligibility map shows that USDA rural development loans are available in many areas outside of the major cities.
There is a great chance that you are located in a “rural” area of the U.S. and eligible for a USDA loan.
The U.S. department of agriculture had planned to make updates to the maps in 2013, 2014, 2015, and 2016. Each time, the scheduled deadline was shifted. In fact, the current deadline has been shifted to October 1, 2017 at the earliest, and may be as late as 2019.
You can check if a certain address is eligible for USDA here
What is a USDA Loan?
USDA loans are a rural housing loan program offered by the U.S. Department of Agriculture to borrowers purchasing a home in rural areas of the country. The official name is the USDA Rural Development Guaranteed Housing Loan Program. USDA loans are aimed at low to median income borrowers. They offer 100% financing and have low mortgage insurance rates.
Benefits of The USDA Loan Program
ZERO Down payment (100% Financing)
Amongst the several benefits of Rural Housing Loan program, the ability to put no money down and get 100% financing is one of the greatest benefits. The USDA loan program is one of only two types of mortgages that require no down payment, the other being VA loans.
Low Mortgage Insurance Premiums
USDA Loans have the lowest MIP of any mortgage program besides the VA, which requires no mortgage insurance. The annual MIP is just 0.30%. When compared to the FHA PMI fee of 0.85% the savings is substantial.
On a $200,000 home, PMI on an FHA loan is $1700 per year. A $200,000 home, USDA loan PMI will be just $600 annually, a savings of $1100 per year.
USDA does have a one time up-front mortgage insurance payment of 1% of the loan amount that is added into the loan.
Borrowers save an average of $100 per month with a USDA home loan over FHA loans because of the reduced mortgage insurance.
USDA Mortgage Details
- Zero downpayment
- Low mortgage rates
- Low PMI (mortgage insurance)
- 30yr and 15yr fixed rate options available
- 640 credit score required
- 97% of the U.S. is in an eligible zone
- Must wait 36 months after a bankruptcy or foreclosure to qualify
- Owner occupied properties only
- Easier to qualify for that conventional mortgages
USDA Loan Program Requirements
To qualify for a USDA loan you must meet these requirements:
- Meet the USDA income limit requirements
- Be a U.S. citizen, non-citizen national or qualified alien
- Occupy the property as your primary residence
- Show a willingness to meet debt obligations
- Choose a home in an eligible USDA rural location
- Work with a USDA-approved lender
- Have an adequate credit score for the loan, preferably 620-640 or higher
To verify if the home you intend to purchase is USDA eligible, head on to the USDA Eligibility page here. Type the exact address of the house in the search box provided, click “GO” and the site will show the eligibility status of the house.
2017 USDA loan Income Limits
USDA loans have set income limits for individuals, or family’s in order to qualify. Your income cannot exceed 115% of the median income in your area.
Most moderate income families will meet the income requirements for a rural development loan. For most areas of the county the income limit for households with 1-4 family members is $75,650 and up to $153,400 in certain high cost cities. You should speak to a USDA loan officer to determine your eligibility.
Check the income requirements in your county on the USDA website
USDA Eligible Home Types
- Single family homes
- New constructions
- HUD approved Condos
- FHA approved Modular homes
- Planned Unit Developments (PUDs)
USDA Single Family Housing Repair Loans and Grants
The U.S.Department of Agriculture also offers loans to rural homeowners to make improvements, repairs, and modernize their home. This program is available to very-low income borrowers who cannot find loans anywhere else.
The USDA also provides grants to very-low income elderly homeowners, 62 years of age or older to remove safety and health hazards.
You must meet these requirements:
- Very-low income less than 50% of the median income in the area
- You must be the owner of the property
- Be able to show usability to receive a loan elsewhere
- Must live in a rural area as defined by the rural housing loan program
- To be eligible for grants you must be at least 62 years of age
How much money can I get?
- $20,000 is the maximum loan amount
- Grants available up to $7,500
- Grant eligible borrowers can also qualify for a loan totaling a maximum program loan amount of $27,500
USDA Credit Requirements
The U.S. Department of Agriculture recently changed the credit requirements. A 640 credit score is required for a USDA development loan. Before this change, it was possible for prospective home owners to qualify for rural development loans with a credit score of 620, sometimes even lower.
USDA Loan Program FAQs
Does the USDA loan program offer refinance loans?
Yes. As long as you’re current on your mortgage and you will save money by refinancing you may qualify for a USDA streamline refinance. USDA does not offer a cash-out refinance program.
What is the USDA loan limit?
On paper, there aren’t any loan limits for a USDA mortgage. However, mortgage lenders set their own loan limits for loans. Typically, lenders will not lend more than $424,100, which is the maximum loan amount Freddie Mac or Fannie Mae will purchase.
Does the USDA loan program have a maximum DTI requirement?
The debt-to-income limit is 41%. Exceptions for borrowers with 660+ credit scores, stable employment, or can “show a demonstrated ability to save.”
Is the USDA loan program only for first time home buyers?
No. Both first-time and repeat buyers can use the USDA loan program.
What does USDA stand for?
USDA stands for the United States Department of Agriculture. USDA promotes the farming and ranching industries, as well as good nutrition and prevent starvation. They also offer the Rural Development loan to promote housing in rural areas of the U.S.
How do you apply for a USDA loan?
You can apply for a USDA loan with any lender that offers USDA loans. We can refer you to participating USDA lenders, just complete this short form.
What credit score do I need to get a USDA mortgage?
USDA guidelines require a minimum 640 credit score to be eligible for the rural housing loan program.