USDA Loans Explained
USDA Loan programs offer a home buyer the chance to purchase a home in a rural or suburban area that is designated as a rural development area by the United States Department of Agriculture. USDA Loan programs offer 100% financing to qualified USDA mortgage loan borrowers. If a home buyer can structure their home purchase with a sellers concession where the home seller will offer a sellers concession towards the home buyers closing costs, the home buyer with a USDA Loan can purchase their home with zero money out of pocket. There is no down payment on the USDA home purchase and the closing costs can be covered 100% with the sellers concession from the home seller. In the event if the home buyer is short with the sellers concession towards their closing costs, the home buyer can get a lender’s credit towards the closing costs of the home loan. A lender’s credit is when the USDA mortgage lender will give a mortgage loan borrower funds to cover part or most of their home closing costs in lieu of a higher interest rate. USDA Loans are extremely popular in many parts of the country.
Eligibility Requirements On USDA Loans
To be eligible for a USDA mortgage loan, the property needs to be in a USDA designated area and the USDA mortgage loan applicant needs to be qualified with regards to credit scores and debt to income ratios. USDA mortgage lending guidelines differ in a way that is different than other mortgage lending programs. There is a maximum household income limit depending on the county the property is located at. If a married mortgage applicant goes on the mortgage loan by himself or herself and the spouse is not on the loan, the spouse’s income is counted as part of the household income even though the spouse is not on the mortgage note. Other factors come into play as well as the number of dependents. Maximum front end debt to income ratios are capped at 28% and the maximum back end debt to income ratios are capped at 41%.