USDA Mortgage Guidelines And Eligibility Requirements
This BLOG On USDA Mortgage Guidelines And Eligibility Requirements Was UPDATED And PUBLISHED On April 26th, 2020
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
In this article, we will discuss and cover USDA Mortgage Guidelines And Eligibility Requirements.
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 Eligibility Requirements
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 need 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 a selected area with zero down payment
- Many times homebuyers’ 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 an 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
Gustan Cho Associates 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 are the only residential loan program in the United States, with the exception of VA loans, that a first time home buyers or homebuyers 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 exist 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, the 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, homebuyers 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 is a national mortgage company 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 GCA Mortgage Group at 262-716-8151 or text us for a faster response. Or email us at [email protected] We are available 7 days a week, evenings, weekends, and holidays.