A USDA home loan is a type of mortgage loan backed by the United States Department of Agriculture (USDA) that is designed to help lower-income and rural homebuyers purchase a home.
To qualify for a USDA home loan, you must meet the following guidelines and requirements:
- Income eligibility: The borrower’s income must be within the specified limits for the area where the home is located. These limits vary by location and household size, but generally, the maximum income limit is 115% of the area median income.
- Property eligibility: The home must be located in a designated rural area, which is determined by the USDA. A property eligibility map can be found on the USDA website.
- Credit requirements: The borrower must have a credit score of at least 640, although some lenders may require a higher score.
- Employment and income: The borrower must have a stable income and employment history.
- Debt-to-income ratio: The borrower’s debt-to-income ratio must be no more than 41%.
- Down payment: USDA loans require no down payment, although the borrower may choose to make a down payment if they wish.
- Mortgage insurance: USDA loans require an upfront mortgage insurance premium and an annual fee.
It’s important to note that while USDA loans are designed to help lower-income and rural homebuyers, they are not just for first-time homebuyers. Additionally, the home must be used as the borrower’s primary residence.