The U.S. Department of Agriculture (USDA) home loans program offers mortgages to low-income residents of rural areas who cannot otherwise obtain a conventional mortgage. If you live in a rural area and can’t qualify for a conventional loan, you may qualify for either a USDA guaranteed loan or a USDA direct loan. The home loans program is designed primarily to help lower-income people living in unhealthy or unsafe rural conditions obtain a home that has modern utilities and adequate space. GET PRE-QUALIFIED FOR A $0 DOWN USDA LOAN

Guaranteed USDA Loan

The USDA will guarantee 90% of a mortgage amount for qualified applicants who obtain a mortgage through a bank or other commercial lender. This makes it feasible for many to get approval for a 30-year, fixed-rate loan with no down payment.

USDA guaranteed loans require borrowers to pay a loan guarantee fee of 1% of the amount borrowed. This fee can be paid by the lender. Borrowers must also pay an annual fee of 0.35% of the loan amount. Individual lenders determine the interest rates they’re willing to offer borrowers on these loans, so it’s important to shop around.

USDA Loan Requirements

Income limits to qualify for a home loan guarantee vary by location and depend on household size. To find the loan guarantee income limit for the county where you live, consult this USDA map and table.

• U.S. citizenship (or permanent residency);

• A monthly payment — including principal, interest, insurance and taxes — that’s 29% or less of your monthly income. Other monthly debt payments you make cannot exceed 41% of your income. However, the USDA will consider higher debt ratios if you have a credit score above 680;

• An acceptable credit history, with no accounts converted to collections within the last 12 months, among other criteria. If you can prove that your credit was affected by circumstances that were temporary or outside of your control, including a medical emergency, you may still qualify.

Applicants with credit scores of 640 or higher receive streamlined processing. Those with scores below that must meet more stringent underwriting standards. And those without a credit score, or limited credit history, can qualify with “nontraditional” credit references, such as rental and utility payment histories.

Eligible home locations

Metropolitan areas are generally excluded from USDA programs, but pockets of opportunity can exist in suburbs. Rural locations are always eligible. Click here to check if the property is eligible for a USDA loan.

Summary

The United States Department of Agriculture (USDA) provides mortgages of last resort to the people in rural areas who need them the most. Qualification standards for these home loans are lenient compared to those of other mortgages, but you will need a steady income that’s high enough to repay the loan over 30+ years at a fixed interest rate. The definition of “rural” is broader than you might think.

We can help you decide if this is the best fit for your situation, give me a call or text at 425-224-5794 if you have any questions.