USDA Loan
Get a zero-down USDA home loan designed for rural and suburban home buyers.
USDA Loan
A USDA home loan is a competitively priced mortgage option that helps to make purchasing a home more affordable for low-income individuals living in designated rural areas. The U.S. Department of Agriculture backs USDA loans in the same way the Department of Veterans Affairs backs VA loans for eligible individuals such as veterans and their families.
This government backing means compared to conventional loans, mortgage lenders can offer lower interest rates in many cases. If you qualify, you can buy a home with no down payment, although you’ll still need to pay closing costs.
USDA Loan Eligibility Requirements
Home buyers need to meet certain USDA eligibility requirements to be considered for a USDA construction loan or qualify for a USDA loan to buy a home. For example, you must live in the home, and it must be your primary residence. Here’s an overview of the other requirements. Homes financed by USDA loans must be in eligible rural areas. You can see if a home is eligible by visiting the USDA’s eligibility site to look over a loan eligibility map. This interactive map will allow you to search for a specific property to see if it’s located within a geographic location deemed eligible by the USDA for this type of government-backed financing.
After you accept the disclaimer, select the “Single Family Housing Guaranteed” option (don’t choose “Single Family Housing Direct”; that’s a different kind of loan). Then just type in the address. Know that you should consult an official USDA representative directly to guarantee that the information you find on the eligibility map is accurate.
The Baldwin Mortgage Group
Income
USDA loans are for families who demonstrate economic need, so your adjusted gross income can’t be more than 115% of the median income in the area. You can find out if your income is eligible in the same place you check property eligibility. Just follow the same link to the USDA’s eligibility site, except choose “Income Eligibility” from the menu. In addition, you must show that you have a stable income and can make your mortgage payments without incident for at least 12 months based on your assets, savings and current income.
Your mortgage lender will also look at your debt-to-income (DTI) ratio when they consider you for a USDA loan. To give yourself the best chance of qualification, we generally recommend a DTI of 43% or lower. You can calculate your DTI ratio by dividing all of your monthly recurring debts by your gross monthly income. Your monthly expenses should include rent, student and auto loan payments, and credit card payments; you don’t need to include expenses for food and utilities.
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