What Is a USDA Loan? Am I Eligible for One?

USDA loans are zero-down-payment mortgages for home buyers who do not have a big income, and can’t get a traditional mortgage.

If this is your case, buying a home might be well within reach, thanks to the U.S. Department of Agriculture mortgage program. 

A USDA home loan is a zero down payment mortgage for eligible rural and suburban home buyers. USDA loans are issued through the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, by the United States Department of Agriculture.

As a part of its Rural Development program, the USDA invested almost $20 billion in 2014 to help nearly 140,000 families buy and improve their homes. The program is designed to “improve the economy and quality of life in rural America.” It offers low interest rates and no down payments, and you may be surprised to find just how accessible it is.

With all types of mortgage loans to choose from, how do you know whether a USDA loan is right for you? Here’s an overview of how it works and who qualifies:

How USDA loan programs work

There are three USDA Loan Programs

Loan guarantees: The USDA guarantees a mortgage issued by a participating local lender — similar to an FHA loan and VA-backed loans — allowing you to get low mortgage interest rates, even without a down payment. If you put little or no money down, you will have to pay a mortgage insurance premium, though.

Direct loans: Issued by the USDA, these mortgages are for low- and very low-income applicants. Income thresholds vary by region. With subsidies, interest rates can be as low as 1%.

Home improvement loans and grants: These loans or outright financial awards permit homeowners to repair or upgrade their homes. Packages can also combine a loan and a grant, providing up to $27,500 in assistance.

Qualifying for a USDA-backed mortgage guarantee

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 us so we can help you.

USDA guaranteed home loans can fund only owner-occupied primary residences. Other eligibility requirements include:

  • 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 660
  • Dependable income, typically for a minimum of 24 months
  • 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.

Those with credit scores of 620 or higher receive streamlined processing. Below 580, you’ll face tougher underwriting. You can qualify with a nontraditional credit history.

Applicants with credit scores of 620 or higher receive streamlined processing. Those with scores below 580 must meet more stringent underwriting standards. And those without a credit score 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. Areas such aas Boiling Springs, Inman, Chesneem are just some of the areas that qualify. Rural locations are always eligible.

Next steps

To apply for a USDA-backed loan or to get more information, call us at 864-329-5189. 

 

USDA Homes For Sale

The data relating to real estate for sale on this web site comes in part from the Internet Data Exchange (IDX) program of the Multiple Listing Service of Spartanburg, Inc.
IDX information is provided exclusively for consumers’ personal, non-commercial use, it may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing, data is deemed reliable but is not guaranteed accurate by the MLS.