When I hear USDA I think of prime beef or rural America. When it comes to loans it is basically a great deal for those who can qualify. The US Department of Agriculture’s USDA Rural Development Guaranteed Housing loan program was designed to improve the economy and quality of life in rural America. If you like being out on land and in the country then this option may be great for you. The biggest benefit is up to 100% financing with no down payment required and still allowing the seller to pay for closing costs. This is one of the cheapest loan options to get into, has a 30 year fixed low rate, and a very low monthly mortgage insurance amount. This option is typically the lowest payment option for those who qualify. Click here to compare options.
- The home must be owner occupied as a primary residence meaning upon closing and for the near future (6 months) you must be planning on living there full time.
- You must purchase a home in a USDA qualifying area – click below and follow the instructions to search a property address or zoom in on the map of the area you are looking at – https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp – click accept on the right hand side of the screen then either input address or zoom in on the map for the boundaries. The highlighted areas are ineligible, the rest of the areas qualify.
- You must income qualify and your net income must be over a certain amount. We do recommend you talk to your loan officer about this part because it is based on your family size, goes off of net income (not gross), and can take other things into consideration, like child care costs and expense. You can see the basic guidelines by clicking here and picking your state, county, inputting size of family, and net income. https://eligibility.sc.egov.usda.gov/eligibility/incomeEligibilityAction.do?pageAction=state – While you don’t want to make too much to qualify for this option you do need to typically be around 29/41 on your front/back debt to income ratios. You can go higher in certain cases with an automated approval which usually needs a 660 or higher credit score.
- Credit scores can be as low as a 581 (with no new negative credit in the past 12 months) but your debt to income must be below 29/41 for front and back ratios. Front is your total house payment including insurance, property taxes, and any homeowners associations dues compared to your total gross income and back refers to your total payments like house, car, credit cards, student loans, etc. compared to your total gross income. It is always good to consult with your loan officer when determining these ratios because certain things are deal specific. For example, many times an installment loan like a vehicle doesn’t have to be counted in your ratio when under 10 months.
- You must be a US Citizen or Permanent Resident
- You must have dependable income usually for at least 24 months unless in same field and recently graduated
- USDA guaranteed loans have no maximum loan limit but we do have to take into consideration the size of the family. A family of three will typically not be approved for a 6 bedroom house on a USDA loan unless there is a good explanation as to why this is needed.