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USDA Loans Requirements, Eligibility, Income Limits & Rates for 2021 | CHFUSDA

USDA Loans Requirements, Eligibility, Income Limits & Rates for 2021

What Is A USDA Loan Program?

In 1991 USDA (The United States Department of Agriculture) started offering loans for the development of rural and suburban areas to home buyers with low-to-average income for their area. They offer financing with no down payment, reduced mortgage insurance, and below-market mortgage rates.

USDA mortgage program is helping homebuyers who never thought they could do anything but rent due to their low income and absolutely no savings.

Why does USDA offer these programs?

USDA mortgage are offered for improving the economy of rural America.

Who benefits from USDA programs?

USDA loans are mainly for borrowers who aren't wealthy and can’t get a traditional mortgage.

USDA Loan Application



 

Single Family Housing Guaranteed Loan Program

The Section 502 Guaranteed Loan Program reduces the risk for approved lenders by providing a 90% loan note guarantee, who further provide a 100% financing to homebuyers. This USDA program provides low and moderate income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas. Eligible applicants may purchase, build, rehabilitate, improve or relocate a dwelling in an eligible rural area with 100% financing.

Under USDA guaranteed loan program the homebuyer must meet the following criteria:

  • Income eligibility: The applicants income should not exceed 115% of the median income limit set for the county. For most part the county income limits are as follows:
    • 1-4 Family members: $90,300/-
    • 5-8 Family members: $119,200/-
  • Must be a primary residence: The loan applicant must agree to live in the house under this program.
  • Residence status: Loan program is limited to U.S. Citizen, U.S. non-citizen national or Qualified Alien.

For more details on guaranteed loan program consult USDA's official website here. To apply for USDA Guaranteed home loan click here and an USDA expert will get in touch with you.

Single Family Housing Direct Home Loans

The Section 502 Direct Loan Program assists low and very-low income applicants obtain decent, safe and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. Payment assistance is a type of subsidy that reduces the mortgage payment for a short time. The amount of assistance is determined by the adjusted family income.

Under USDA direct loan program the homebuyer must meet the following criteria:

  • Income eligibility: The applicants must have an adjusted income that is at or below the applicable low-income limit. For the most part the low-income limits are as follows:
    • 1-4 Family members: $52,300/-
    • 5-8 Family members: $69,050/-
  • Current home owners: Must be without a decent, safe and sanitary housing. All first-time home buyers qualify this criteria.
  • Must be a primary residence: The loan applicant must agree to live in the house under this program.
  • Cannot get a loan from bank/lenders: Are unable to obtain a loan from banks/lenders due to terms and conditions that can reasonably be expected to meet.
  • Loan obligation: Have the legal capacity to incur a loan obligation
  • Residence status: Loan program is limited to U.S. Citizen, U.S. non-citizen national or Qualified Alien.

Under USDA direct loan program the property must also meet some requirements, that are as follows:

  • Eligible area: The house must be within an USDA eligile area. Generally, all rural areas with population below 35,000 qualify as eligible areas.
  • Covered area: The covered area for the single-family home must be at or below 2,000 Sqft.
  • Market value: The market value of the house should be below the applicable area loan limit. For most part the loan limits are set at $285,000/-
  • Swimming pools: A bit odd, but the house cannot have an in-ground swimming pool.
  • Cannot be income producing: The property itself should not be designed for income producing activities, like barn, farm etc.

For more details on direct loan program consult USDA's official website here. To apply for USDA Direct home loan click here and an USDA expert will get in touch with you.

Note 1: USDA official website last assessed on 22nd Apr 2021 for updated content and terms.

Note 2: Guaranteed and Direct are the two programs for home buyers. Guaranteed is materialized with the help of a lender but still has to be approved by the USDA.

  • US Citizen : USDA loans are offered only to United State citizens (or permanent resident).
  • Credit Score : Ideally 640+ credit score is required, but you may qualify with a lower credit score also.
  • Income Stability : Ideally should have a consistent income for 24 months.
  • Income Limits : Home buyers income must be within the prescibed limits. Income limits change from county to county.
  • DTI Ratio : Debt-to-income ratio cannot exceed 41% of your total income. If you have a score of 680+ the USDA may consider higher debt-to-income ratio.
  • Monthly Payment : Applicants mortgage payment including taxes and insurance should not exceed 29% of total income.
  • Residence : Applicant must be willing to live in the home they are about to purchase.

Apart from home buyers eligibility, the property should also be in a location eligible for USDA loan. Metropolitan areas are excluded from eligible areas, nearby areas may qualify for the USDA program. If you are willing to go for USDA mortgage make sure to check the USDA eligibility of the property. One more thing as per USDA guidelines is that the property itself cannot be an income producing if you want to avail this program.

The best way to get started is by doing a home search from the list of properties which are listed for sale and are also in an eligible zone.

Multi-unit houses will not qualify for a USDA loan. Moreover USDA mortgage cannot be availed for vacation homes, investment property or a property having a working farm.

With a USDA loan, you don't have to make a down payment. This is one of only two major loan programs (other being VA loan) that allow zero-down financing. Some of other benefits are listed below:

  • Flexible credit guidelines : You can qualify with credit scores as low as 640, if your credit is less than that try to improve and get past that number as USDA might not approve your loan.
  • Low interest rates : Low mortgage Rates that have a maximum cap determined by USDA.
  • 30 year fixed rates : Fixed mortgage terms insures stability with mortgage payments.
  • Government guaranteed : Helps in getting qualified for 0 down
  • Low Mortgage Insurance : USDA has 0.35% mortgage insurance compared to 0.85% for FHA loan.
  • Ability to roll in your closing costs : Closing costs which can be anywhere from 0 – 6% can be rolled in your loan amount.

To apply for USDA home loan click here and the USDA expert will get in touch with you or click the number below to talk directly with an USDA loan expert.

CHF USDA Online Help

Connect With An Agent

Call us and we will connect you to a local Real Estate Agent.

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Check Your Eligibility

Talk to a USDA mortgage expert and see if you can qualify for a USDA loan.

1-833-424-3462

Lock In Your Rates

Talk to a mortgage loan officer and find the best deal on rates for your case.

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