The United States Department of Agriculture, also known as USDA, offers residential mortgage loan programs that require no down payment from the home buyer and offers 100% financing on residential mortgage loans on select areas as long as the mortgage loan borrower meets USDA mortgage lending guidelines. USDA loan program offers competitive mortgage rates.
Types Of USDA Loan Programs
USDA Guaranteed Home Loan: The USDA RD Guaranteed Loan Program is the more common USDA loan program due to the fact that it allows USDA loan borrowers who have average to higher incomes to get USDA mortgage loan approvals with 100% financing with no money down. Mortgage loan borrowers who apply for the USDA Guarantee Loan program are eligible with taxable income of up to 115% of the household median income of the population of their county. All USDA mortgage loans are 30 year fixed rate loans.
USDA Direct Home Loan: USDA RD Direct Mortgage Loans are given on a selected basis than the traditional more popular USDA Guaranteed Mortgage Loans. USDA RD Direct Mortgage loans have been created to help lower income families get 100% financing with no money down.
USDA Loan Versus Other Loan Programs
There are many advantages of USDA Loan programs. USDA Loan programs home buyers an opportunity to purchase a home at selected area with zero down payment. Many times home buyers’s monthly housing payments on a USDA Loan is less than their actual current rental payments. Plus the USDA Loan homeowner has great potential in having their homes appreciate in value over the years. USDA loans have tougher mortgage lending guidelines than FHA loans. For example, to qualify for a FHA loan, the mortgage loan borrower only needs a 580 FICO credit score. Most USDA mortgage lenders require a credit score of 640 FICO or higher. Debt to income ratios caps on FHA loans are 56.9% debt to income ratios. With USDA loans, the maximum debt to income ratios are capped at 43% debt to income ratios. USDA loan programs is the only residential mortgage loan program in the United States, with the exception of VA loans, that a first time home buyer or home buyers can purchase a residential home with no money down. There is a 2% funding fee that is charged on each USDA Loan but the funding fee can be rolled into the USDA loan balance.
USDA Loan Qualification Requirement
USDA Loans is not available for everyone and not available in all areas. The region where the home is located needs to be a USDA approved area in order for the property to qualify for a USDA Loan. The home buyer also needs to meet the minimum USDA Loan mortgage lending requirements. The home buyer’s income, credit, and liabilities will be determining considerations for qualifying for USDA Loan eiligibility requirements. To determine whether a home buyer meets USDA Loan qualification minimum requirements, the homeowner’s housing expenses cannot surpass a 31% debt to income ratios cap. The back end debt to income ratio caps are set at 43%. These ratios can be exceeded if compensating factors exists for the mortgage loan borrower. Compensating factors are like rental verification, reserves, and higher credit scores.
Income Requirements On USDA Loans
USDA Loan program mortgage loan borrowers can get qualfied for a USDA loan with incomes up to 115% of the area median income. Those with super high incomes are not eligible for USDA loan programs. USDA loan mortgage lenders require a minimum credit score of 580 FICO to be able to qualify for a USDA loan. Most USDA Loan mortgage lenders do have credit score minimum overlays of 620 FICO or 640 FICO credit scores.
To qualify for a USDA Loan, the mortgage loan borrower’s income must be at or below the maximum allowed per USDA income set limits for the geographical area the subject property is located.
Types Of Properties Eligible For USDA Loans
To be eligible for a USDA loan, home buyers must purchase owner-occupant homes. You cannot purchase a second home, vacation home, or investment home with a USDA loan. You can purchase, new homes, existing older homes, condominiums, and new manufactured homes with a USDA loan.