The USDA Home Loan is one of the few remaining 100% mortgage financing programs available in today’s credit climate. USDA or United States Department of Agriculture has earmarked funds available for their rural development loan program. This program is intended to offering competitive financing to rural markets.
USDA Home Loan – The Benefits
For certain individuals, the benefits of a USDA Home Loan can be substantial. Here are some of the positive factors for the rural development loan program:
- Increased income limits
- Flexible credit requirements and qualification requirements can help borrowers where traditional banks cannot
- No down payment and no cash reserve requirements can make funding easier for applicants
- Not limited to first time home buyers
- No maximum purchase price
- Alternative credit for individuals with minimal credit trade lines
USDA Home Loan – Are You Eligible?
Eligibility for a USDA Home Loan is based on three primary requirements. First, the home must be in a designated geographic area approved for rural development funding. Second, the total household income may not exceed 115% of median income for the area. Lastly, applicants must meet credit and income requirements set forth by the lender.
A USDA Home Loan authorized lender or real estate agent can help you identify any areas local to you that are eligible for rural home loan financing. You might be surprised to find that there are homes around you that qualify. Generally, these are communities of fewer than 10,000 persons except that certain communities between 10,000 and 25,000 population are considered rural based on their distance from urban areas. Be sure to check with an authorized lender or real estate agent to be sure you are looking in the correct areas.
Income eligibility for a USDA Home Loan is based on the Adjusted Household Income. The ADI cannot exceed 115% of the median income level for the area and takes into account various factors such as:
- Total members of the household
- Students as well members under the age of 18
- Disabled persons
- Elderly persons living in the home
- Child care expenses
- Medical expenses
Lastly, lenders set forth income and credit requirements. Although USDA does not have a minimum credit score requirement for a USDA Home Loan, most lenders require a 620 or higher credit score. Applicants must demonstrate the ability and willingness to pay for the loan in a timely manner and have a credit history showing timely payments as they become due.
USDA Home Loan – What next?
In order to see if a USDA Home Loan is right for you, the next step is to contact an authorized rural financing lender. Lenders are available in every state. See our home page for USDA Home Loan lenders and their rates. To prepare for an application, you will need to know your current gross income, which is your income before any deductions are withheld, your liquid assets – statements for checking, savings, retirement, 401k, or money market accounts as well as your residence and employment history. With those items, a lender can appropriately determine if you qualify for a USDA Home Loan in your area.
USDA Home Loan – In Summary
The USDA Home Loan program is one of the best financing programs available if you meet the eligibility criteria. Not only is it one of the few zero down home loan programs available, it offers the added security of a 30 year fixed mortgage rate, giving you the added peace of mind that your budget won’t be affected by rising interest rates in the future. The stability of the interest rate, combined with the liberal income and credit eligibility requirements, make the USDA Home Loan program an excellent way for today’s families to purchase a home.