The USDA Guaranteed Home Loan
This loan offered by the United States Department of Agriculture through authorized mortgage lenders is one of the most attractive yet undervalued mortgage options available today. It boasts of fantastic features such as up to 100% financing and zero-down payment options. The caveat is that the USDA loan is not for everyone. The mortgage does not cover metropolitan areas. It is also specially designed to give households and individuals with limited incomes the opportunity of buying a house, which may be quite tricky through the traditional means.
If you want to qualify for USDA rural mortgage, you must meet both property and homebuyer requirements listed below:
Property and Homebuyer Requirements to Qualify For USDA Loan
- USDA-eligible Areas
The location of the home must be in what the USDA considers as a “rural area” based on the USDA property eligibility sitemap that can be accessed through the USDA website. But don’t be misled, rural in USDA terms does not necessarily translate to “agricultural” or “farm.” You may be surprised to know that small cities and suburbs with a population of less than 20,000 qualify for a USDA-guaranteed mortgage.
- Property Type and Standards
The USDA issues loans limited to single-family residences. Borrowers may also apply for condominiums and townhouses as long as they adhere to specific USDA guidelines. Furthermore, lending companies conduct an appraisal of the property to ensure that they meet basic safety and livability standards. After addressing the issues found during the assessment, the involved parties can proceed with closing the loan.
Because the USDA loan only qualifies households with moderate to below-average income levels and those without access to decent housing, the borrowers are expected to occupy the mortgaged property as their primary residence.
To qualify for USDA loan, the borrower must be a citizen or a permanent resident of the United States.
- Credit Score
Although you don’t need an above-average score to obtain approval, you must have a good payment history and a FICO score of 640 to get a streamlined approval. If your score is below 640, you may still qualify with the help of additional documentation as requested by the lender. This may include utility bill payments, insurance receipts, rental history, and the likes.
- Income and Employment
Only households with gross earnings not exceeding 115% of the AMI may apply for the loan. This will be adjusted according to the size of the household. You must have a stable and dependable employment to qualify for the credit, as this will determine your capacity to make mortgage repayments.
- Debt-to-income Ratio
The current debt-to-income ratio set by the USDA is 29/41. This means that your accumulated debts, including the mortgage, must not be beyond 41% of your monthly gross income. Moreover, only 29% of the said income must go to home loan payments.
For more information on how to qualify for USDA loan…
To get more comprehensive understanding regarding the nature and stipulations of the loan, you can talk to USDA-approved mortgage companies in your area. Most lenders also offer a fast and easy USDA online pre-qualification. Who knows? This might be your chance to finally afford a home of your own!