What is a USDA Home Loan?
USDA Home Loan Program provides 102% financing (the purchase price and guarantee fee) for low- to moderate-income homebuyers wanting to buy a home in a rural development area. USDA Home Loans are affordable and backed by the federal government. Qualified program participants must purchase a home in an eligible rural area, as defined by the U.S. Department of Agriculture, and have a household income that does not exceed the established limits where the home is located.
What are the benefits of a USDA Home Loan?
USDA Home Loans offer the following features:
- 100% financing on a fixed 30-year loan, based on the appraised value of the home.
- Upfront guarantee fee may be included in financing.
- No down payment required.
- Competitive interest rates.
- Lender fees and closing costs (including prepaid funds) may be contributed by the seller or may be eligible to include in the loan, depending on the appraised value.
- Gifts or grants permitted from family, friends, and non-profit agencies.
- No post-closing reserves or minimum investment required.
Who may benefit from a USDA Home Loan?
Both first-time and experienced homebuyers may take advantage of a USDA Home Loan, provided they meet the following qualifications:
- Income limits cannot exceed the USDA’s Rural Development Single Family Housing Guaranteed Loan Program income limits for the area.
- Must have a minimum credit score of 640 (660 if have a prior short sale) and debt-to-income ratio of 41%.
- Credit history with no more than one “30-day late” payment in past 12 months and no major credit problems in previous 36 months.
- Eligible properties include existing single-family homes, new construction, modular homes, planned unit developments (PUDs), and eligible condominiums.
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