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Do You Qualify For A USDA Home Loan?

Before you get on with this, try to obtain a comprehensive insight into what actually is a USDA loan. For those of you who don’t know, USDA loans are mortgages that require zero down payment. They are primarily beneficial for borrowers who aren’t affluent enough to avail a traditional mortgage. They are issued by the United States Department of Agriculture through the USDA loan program or the USDA Rural Development Guaranteed Housing Loan Program.

The Objectives Of The USDA Program

Last year, as an agenda of its Rural Development program, the USDA assisted over 125,000 families in purchasing, renovating, and upgrading their homes. The main aim of this program is to improve the quality of life in the rural parts of the United States and to boost the economy of those areas. The USDA provides low rates of interest and a zero down payment. Thanks to the U.S. Department of Agricultural mortgage program, getting access to a new home is well within your reach. Here are the types of loans you can avail:

Direct Loans

These mortgages are issued by the USDA specifically targetting those individuals who survive on very low earnings. The income thresholds depend on the region where the person resides. With the help of subsidies, the rate of interest can even be as trifle as 1%.

Loan Guarantees

A mortgage is guaranteed by the USDA and is issued by a local lender who participates in the program. It’s pretty much on the lines of an FHA loan and gives you the opportunity to get hold of low mortgage interest rates, that, too, without a down payment. In case you don’t put down a significant sum, you will need to shell out a mortgage insurance premium.

Home Improvement Loans And Grants

These loans allow homeowners to renovate, repair, or upgrade their homes. The packages amalgamate a loan and a grant and shell out a financial aid close to $28,000.

What Do You Need To Qualify For A USDA Mortgage Guarantee?

USDA home loans can provide funds to owner-occupied residences only. In addition to that, there are other eligibility requirements such as holding a permanent residency in the United States, and a monthly payment including taxes, insurance, interest, and principal that’s around 29% or less of what you earn in a month. Your debt payments in a month must not cross 41% of your earnings. But if you hold a credit score over 680, higher debt ratios will be taken into consideration by the USDA.

Other Eligibility Rules

Moving on, a few other eligibility factors include a substantial income, at least for a period of two years, and a satisfactory credit history with no conversion of accounts to collections over the past one year. In case you are able to prove that your credit was largely influenced by unforeseen and uncontrollable circumstances such as any medical emergency, you are close enough to qualify. Applicants who possess a credit score of 640 and above get into streamlined processing. Those who have a score below that should provide an underwriting. And individuals who don’t have a score or doesn’t have a proper credit history are eligible to make the mark with unconventional credit references like utility and rental payment records.

How Does A Loan Issued By USDA Work?

Aside from providing financial aid to potential homebuyers, the USDA kits out mortgages to applicants who are in dire need like families or individuals who have no access to safe, decent, and sanitary housing, are unable to procure a home loan from conventional and known sources, or have an income that’s at par with or lower than the low-income limit for the region they belong to. The USDA generally provides direct loans for homes that cover an area of 2,000 square feet or below and has a market value that’s less than the loan limit of that concerned area. For posh neighborhoods in Hawaii and California, the USDA shells out a home loan of $500,00 or more whereas, in the rural areas of the country, the loan amount may come down to nearly $100,000.

If you want to apply for a USDA loan, you can have a discussion with a participating lender, and if you are more keen to avail a USDA direct mortgage or home improvement loan or grant, you need to visit the USDA office within your state. Remember, eligibility is all about your location and your income. Your occupation comes nowhere in the picture.

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