The Lenders Network

USDA Home Loan Program Requirements [Updated for 2018]

The U.S. Department of Agriculture doesn’t just provide nutrition services.

USDA also guarantees loans in eligible rural areas of the country.

When you think “rural” you think of Famers and cows.

However, what if I told you that 97% of the country is in an eligible area?

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.

» MORE: Get Preapproved for USDA

The current U.S. Department of Agriculture eligibility map shows that 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-backed mortgage. 0% down payment makes them great for first-time homebuyers.

You can check if a certain address is eligible here

What is the USDA Home Loan Program?

The USDA Guarantee loan is a 100% financing mortgage for moderate-to-low income homebuyers in eligible rural and suburban areas.

Loans are issued through the USDA Rural Development Guaranteed Housing Loan Program, which was created by the U.S. Department of Agriculture.

USDA loan guarantees: USDA 502 direct loan guarantees a mortgage issued by private lenders. In this way they are similar to FHA and VA Loans.

The Government insures the mortgages which protects the lenders in the event the borrower defaults on the loan. Government-backed loans will require mortgage insurance in order for them to guarantee the mortgage.

There is a guarantee fee that can be rolled into the loan. Closing costs cannot be rolled into the loan.

Benefits of The USDA Loan Program

No Downpayment Loan (100% Financing)

Amongst the several benefits of the USDA  program, the ability to put zero-down and get 100% financing is one of the greatest benefits. They are one of only two types of mortgage loans that require no down payment, the other being VA loans. These benefits make these loans perfect for first-time home buyers.

Low Mortgage Insurance Premiums

USDA mortgages the lowest MIP of any home loan 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 PMI will be just $600 annually, a savings of $1100 per year.

There is 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 Home Loan Benefits

USDA Loan Requirements

To verify if the home you intend to purchase is 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.

USDA Income Limits 2017

This rural housing loan has set income limits for individuals, or family’s in order to qualify. Your household income cannot exceed 115% of your area median income.

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. The maximum debt-to-income ratio for USDA loans are higher than a conventional loan.

You should speak to a lender to determine your eligibility.

Check the income requirements in your county on the USDA website

USDA Property Eligibility

Properties financed with direct loan funds must:

USDA Loan Limits (Updated 2017)

The loan limits for the USDA program vary from county to county based on the median home prices in the area. Check the loan limits in your county here.

Streamline Refinance

In 2012 the USDA launched their streamline refinance program. The streamline refinance is for borrowers with a USDA mortgage loan who have a rate higher than the current interest rate.

USDA 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.

USDA grants to very-low income elderly homeowners, 62 years of age or older to remove safety and health hazards.

Who qualifies:
You must meet these requirements:

How much money can I get?

USDA Loan Credit Score Requirements

The U.S. Department of Agriculture recently changed the credit requirements. A 640 FICO score is required for a USDA loan. Before this change, it was possible for homebuyers to qualify for with less than adequate credit history.

These loans are Governed by:

Raise Your Credit Score for a USDA Loan

If your credit rating is under 640 and you want a USDA loan the only chance you have is to increase your credit score so you’ll be eligible. There are few techniques you can do to increase your credit score before applying for a mortgage loan.

Pay Down Credit Card Balances

You credit utilization ratio is the ratio of the amount of your credit card limits you are using. It accounts for 30% of your overall credit score. Only your payment history (35%) has a bigger impact on your credit score. Try to pay down the balances your cards to less than 20% of the limit to maximize your scores.


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