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2018 USDA Mortgage Guidelines And Eligibility Requirements

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2018 USDA Mortgage Guidelines And Eligibility Requirements

This BLOG On 2018 USDA Mortgage Guidelines And Eligibility Requirements Was UPDATED On September 2nd, 2018

The United States Department of Agriculture Rural Development, also known as USDA Rural Development, offers residential mortgage loan programs that require no down payment to home buyers:

  • Offers 100% financing on residential mortgage loans on select areas
  • Borrowers meets USDA Mortgage Guidelines
  • USDA loan program offers competitive mortgage rates due to government guaranteeing lenders in the event borrowers default and property goes into foreclosure

Types Of USDA Loan Programs

USDA Guaranteed Home Loan and USDA Mortgage Guidelines:

  • The USDA RD Guaranteed Loan Program is the more common USDA loan program
  • This is due to the fact that it allows borrowers who have average to higher incomes to get USDA approvals with 100% financing with no money down
  • 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
    • Borrowers and property needs to meet USDA Mortgage Guidelines

USDA Mortgage Guidelines 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 lending guidelines than FHA loans
  • For example, to qualify for a FHA loan, the borrower only needs a 580 credit score
  • Most USDA lenders require a credit score of 640 or higher due to lender overlays
  • The Gustan Cho Team at Loan Cabin Inc. has no overlays on USDA Home Loans

USDA Mortgage Guidelines On Debt To Income Ratio

  • 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 41% debt to income ratios
  • USDA loan programs is the only residential loan program in the United States, with the exception of VA loans, that a first time home buyers or home buyers can purchase a 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 Mortgage Guidelines
  • The home buyer’s income, credit, and liabilities will be determining considerations for qualifying for USDA Loan eligibility requirements. 
    • To determine whether a home buyer meets USDA Loan qualification minimum requirements, the homeowner’s housing expenses cannot surpass a 29% debt to income ratios cap
    • The back end debt to income ratio caps are set at 41%
    • 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 qualified 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 lenders require a minimum credit score of 580 to be able to qualify for a USDA loan
  • Most USDA lenders do have credit score minimum overlays of 620 or 640 credit scores not because of USDA Mortgage Guidelines but because of their overlays on credit scores
  • To qualify for a USDA 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.

  • Home Buyers cannot purchase a second home, vacation home, or investment home with a USDA loan
  • Buyers can purchase, new homes, existing older homes, condominiums, and new manufactured homes with a USDA Home Loans

Qualifying For USDA Mortgage Loans With Direct Lender With No Overlays

Gustan Cho Associates at Loan Cabin Inc. is a direct lender with zero lender overlays on USDA Loans. To qualify for USDA Home Loans with a direct lender with no mortgage overlays on government and conventional loans, please contact us at The Gustan Cho Team at Loan Cabin at 262-716-8151 or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays.

Gustan Cho

www.gustancho.com

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