USDA Loans Guidelines
USDA Rural Loans Guidelines
(Updated as of 11/30/2017)
USDA Rural Development home loans or USDA loans are typically used by medium income households to purchase homes in eligible areas. The funds can also be used to build, repair, renovate or relocate a home, or purchase and prepare sites, including providing water and sewage facilities, although it might be tough to find a lender willing to take on some of the available options.
USDA home loans are available in all 50 states as well as the Virgin Islands, Western Pacific & Puerto Rico. The general guidelines for the loan program are the same throughout all eligible areas. Check with an USDA approved lender to see if they will lend in all areas.
There are two different types of USDA loans. There is a direct program that is handled by your local USDA service center. These loans are for low income households. The second type of USDA loan is the 502 Guaranteed program. These loans are catered to more of a average household income. These loans are done by lenders and banks and are insured through the USDA’s Rural Development program.
The home must be purchased in an area designated eligible by the USDA. USDA Loans location eligibility can be found by going to the USDA eligibility page here. Applicants for loans may have an income of up to 115% of the median income for the area they are interested in. State and county income limits can be found here USDA home loan income eligibility. Individuals or families must be able to afford the housing payment, which includes taxes and homeowners insurance, along with reasonable credit and not own a home by the closing date.
The mortgage will be for a term of 30 years with interest rates that are comparable with any other 30 year government mortgage. Because of the terms of a USDA home loan, payment are lower than most other loans on the market today. There is no maximum loan amount. There is a yearly fee that is .35% of the loan amount per year broken down into 12 monthly payments.
USDA Loan Approval
To be eligible the applicants middle credit score must be at least a 620. The standard debt to income (DTI) ratios for the USDA home loan are 29%/41% of the gross monthly income of the applicants. The maximum DTI on a USDA loan is 34%/46% of the gross monthly income. USDA will allow these DTI ratios with compensating factors. There are no guidelines on the amount of applicants per loan, however, non occupying co-borrowers are not allowed, therefore, applicants must provide evidence that it will be their primary address. The credit report must document at least two accounts that have been opened for 12 months. These accounts can be opened or closed. There are alternative methods that can be used to qualify the credit. Please contact us for more info.
The USDA’s Rural Development home loan program requires that the home being purchased meets standard HUD handbook guidelines 4150.2 and 4905.1. These guidelines are typical for any government backed loan. Any problem with the home being purchased that would impact safety and livability will be an issue, however, if the home doesn’t have any of those problems then you have nothing to worry about.
Manufactured housing must be permanently installed and meet the HUD Manufactured Housing Construction and Safety Standards and HCFP thermal and site standards. Existing manufactured housing will not be allowed unless it is already financed with an USDA loan or it is Real Estate Owned (REO) formerly secured by an USDA loan. Although there are not too many lenders willing to do manufactured housing.
USDA Loans Helpful Links:
USDA Loan Handbook
For more information about the USDA loan guidelines fill out a contact form or call to speak to a USDA loan specialist at 1-888-807-2353.