USDA Home Loan Guidelines
Your Guide to the USDA Home Loan
Given today’s tough lending standards steady income and good credit may not be enough to qualify for a home loan. Lending institutions are looking for security and that is where the USDA Home loan program steps in. This program insures up to 90 percent of the loan amount. So if a homebuyer borrows $100,000 from the lender and then defaults on the loan, the USDA will pay back up to $90,000
USDA guaranteed home loan can assist most individuals and families in rural areas become homeowners. The primary purpose of the USDA’s Guaranteed Rural Housing Program is to help moderate and low income borrower qualify for a mortgage loan, even if they cannot afford to make a down payment.
About Guaranteed Rural Housing financing
- Qualifying for a Guaranteed Rural Home loan
- Have dependable and adequate family income. (Family income is defined as the combined gross income of the applicant, the co-applicant, and any other adult living in the household.)
- Meet moderate income limits for your specific area.
- Have a credit history which indicates a reasonable ability to pay obligations as they come due.
- Be a citizen of United States, a qualified alien, or legally admitted into the U.S. as a permanent resident.
Before being approved for a Rural Housing loan some predetermined ratios are taken in to account to determine their repayment capabilities. Total debt must not exceed 41% of their gross income. The ratio is calculated by dividing the homeowner’s monthly debt payments by their gross income. These debts include, but are not limited to, new mortgage payment (principle, interest, taxes, and insurance), car payment, loan payment, credit card payments, child support, alimony and any other payment that will take longer than six months to fulfill.
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Comments (88)
hAVE HAD A USDA LOAN 20YRS NOW 10 LEFT TO PAY. BECAME DISABLBLED 4 YRS AGO.JUST ME 54YRS-DAUGHTER 14YRS,HAVE A SUBSITY.WE BOTH GET SOCIAL SEC. MY DOCTOR WROTE STATEMENT I NEED TO FIND A PLACE EFFIENCY MAINTENCE FREE,I AM PHYSICALLY AND MENTAL DISABLED(BI-POLAR.)I FOUND A NICE APARTMENT FOR US ONLY ITS ALSO A USDA PLACE ALSO OFFERING A SUBSITY.iM WANTING JUST TO TURN THE HOUSE IM LIVING IN NOW BACK TO USDA LET THEM FIGURE WHAT I OWE,MY HEALTH IS NOT GOOD.IF I DO THAT THAT WAY .CAN I LEAVE AND RENT THE APARTMENT WE NEED A HOME NOW OR WILL I HAVE TO WAIT UNTIL MY HOUSE IS SOLD.I MEAN I KNOW IT SOUNDS LIKE I WOULD HAVE 2 PROPERTIES IN MY NAME BOTH USDA BOTH WITH SUBSIDYS. BUT I HAVE MEDICAL PROOF AN I WOULD ONLY OCCUPY APARTMENT.
My husband and I have worked very hard to recover from a bankruptcy. The bankruptcy was 2 years ago. We have steady employement and own a piece of property we would LOVE to build a home on. We were originally told we could get a construction loan at the 2 year mark but have now been told we have to wait 4 years. We are being told that we have to wait 3 years to qualify for the USDA program. We have already prequalified that we can purchase a home but have been told we can buy a house just cant build. This does not seem fair why would I buy someone’s house when we already have property we want to build on. Our credit scores are not an issue as we have gotten them in the mid 700′s depending on the report. We have paid off 2 cars in the 2 years before loan contract was up. We have our down payment wrapped up on the value of our property as we have used savings we could of had to pay off debt to get our scores where they are. We made mistakes and have learned from them. We should not have to be punished forever. I have heard we can get a waiver at the 2 year mark has anyone had any luck with this?
what is the typical waiting period between getting pre-approved and getting the actual loan? It has been two weeks since they recieved ALL of our further information after we were pre-approved and still know word. Im worried we’ve gotten our hopes up?
Ford, it depends on the lender/broker you are working with, partly…keep on top of them, they are getting quite busy with loans and re-fi’s and many are swamped, but they can’t forget about you if you are calling them all the time for updates, right?
whats the time frame from a foreclosure to obain a usda loan?
I just got pre approved for a USDA loan, but they couldn’t do it until this month, because my foreclosure was not 36 months out until this month (my house was foreclosed on in May of 2009). So they want to see 3 years between the foreclosure and getting a new home loan
I currently have a USDA loan and it will be 3yrs in July.We are leaving the country and want to rent out our home. Is there any restrictions with USDA?
hi, I’am trying to get a USDA loan. I mailed my paper work in Feb-2012,I got a letter back from them need me explain my credit score. I sent that back in MARCh -2012. How long do it take,and if i have 570 credit score, will I get on the progarm
Kelly – the USDA guidelines don’t have a specific credit score minimum for their program, however, lenders are encouraged not to accept loans with less than a 580 score, and would prefer to see a 620+ score. However, that is up to the lender. while you are waiting to hear back, why not take a look at some ways to improve that score. Pay down what balances on credit cards you may have to half the credit limit, keep paying creditors on time, and if you don’t have any credit cards, get a secured credit card, and then keep the balance below half. We personally paid down 3 or 4 small cards down to half and it improved our scores by anywhere from 7-20pts in one month. You are so close, why not see what you can do to get yourself above 580 to improve your chances? Good luck!
I have a income of 62k a year and been at same job as Service director for 5 years i have some old stuff on my credit 2 old medical bills and they said my scores are 599 609 629 and i cannot get a loan? help what can i do? thanks
pay on credit cards first that will boost up your score quick and call on the medical bills make arrangment like $30 a month if u take care of that now you on your way to your new home good luck…..
re: pay over 50% of your balance on credit cards
Some advice to everyone. While USDA loans seem great on the surface (no downpayment! Low credit scores ok!), they take a long time to approve and often it seems the USDA will run out of money for the fiscal year. We had excellent credit (780) and were right at the income threshold. After sixty days and wasted money on inspections, etc, we were told, sorry, no approval because they ran out of money. Try again next year, if The Federal government keeps the program funded. So we ended up buying a house without USDA and eating up our savings. So now, a year later, life suddenly changed for us and we are trying to sell this house to move elsewhere. The lesson we learned is while home ownership is a fun goal, the reality is that you should not force the issue if you cannot put a large downpayment or better yet buy it with cash. We put 20% down and now will likely lose that hard earned downpayment in this falling market. Lesson learned? Renting ain’t so bad. Good luck to everyone.
I was told that a USDA loan was the best way to go when your credit score is not so great and you are considered low income. Do I have to meet the Moderate Income level to qualify? Would my chances be better with USDA or FHA?
Credit Requirements are about the same.
Does the home purchase have to be less than 10 acres to qualify for a USDA loan?
what is considered a barn? Why if it is a usda loan in a rural area, where most places have out buildings and barns, does this disqualify a property?.. that just sounds craze
We are going thru the same thing. Has a barn so sorry. We are calling it a garage/workshop and seeing if that will fly. The building is really too small to be a real barn.
is it a loan amount that usda loans i live in middleburg fl the home i am looking to buy is around $ 200k my income is ok had 4 things on credit but was paid off last year ty for a reply
Our offer accepted on Jan 6,underwriting took 4 weeks – could be longer if I would not call them and asked what additional documents were needed.USDA waiting time was 4 weeks.Now USDA asked my husband to submit his Profit and Loss statement or Tax return for 2011- this is only February!He broke even last year,but we do not know what to expect if they will consider his last year profit as a POTENTIAL EARNINGS!Lender reassures us,but I already do not know what to believe to….Filed two extensions already.This is Guaranteed Loan and we are on the top margin for moderate income for this program.But if USDA will look at my husband’s income from e-bay sales as POTENTIAL INCOME (LAST YEAR EXPENCES ATE ALL PROFIT THOUGH) – WE ARE NOT GETTING THE LOAN THEN!omg…..Any ideas what shall we expect now?
I am looking to buy a home and I know the credit score for the usda loans is 640 but someone told me that I cannot have anything on my credit is that true and I have an old loan that was charged off and then I paid it but it was never removed and wont be for 2 more years is that a problem?
I was reapproved last year for a USDA loan my closing is the 15 th but it still has not went to USDA yet because I am my 19 yr old nephews payee for is disability check and they want proof of guarding ship but I’m not his guarding he don’t need one just a payee can they use this to deny the loan it’s the only thing stoping us from USDA
I am interested in refinancing my current USDA loan. What are the fees involved? My mortgage consultant is telling me that there is a 1.5% fee due upfront and .30% of the loan amount divided by 12 months added to my monthly payment for mortgage insurance. Is this correct??
Denise, as of April 9, 2012, there are no longer an MIP’s on USDA loans. (the 1.5% up front and .3% monthly fee)…check with him again.
We have been paying on a home from rural developement for 12 years. what does it mean when it says deferred payments cannot be granted after 15 years from the effective date of the initial payment assistance agreement. Date of initial deferred payment agreement says 00/00/00.
My husband is in the military and my loan processor grossed-up his non taxable housing allowance for repayment purposes. The underwriter is saying that we can’t do this. Eveything I have read in RD underwritting says that grossing-up non taxable income is permitted. Can anyone tell me if they have had experience with this ?
We were approved for a USDA loan back in Sept. 2011. My husband and I have quite a bit of collections that date back from when we were fresh out of high school! Lesson very much learned. Anyway, we paid off all of his debt, my credit meets the requirements, so I was fine. I did have a bump with my student loans, but that was all squared away…I hope. Anyway, we had our home built and it was completed last month and the mortgage company asked us to resubmit all of our paperwork. Well after overtime and bonuses, our income exceeded the income requirements. My husband’s credit only got up to a 592, after paying all of his debt. The mortgage company is still going to submit our paperwork to USDA, they stated that they can back out our childcare and had us get letters written from our jobs stating that overtime is not mandatory or the norm. They informed us that USDA would take the credit score and that they would fight to prove our income is not always as high as it was. With that said, is there any hope that USDA will approve us for a loan? We are a bit skeptical and this has been a very lengthly and stressful process.
Also, my student loans were making my income/debt ratio too high, but when they factored in my overtime, it balanced out. So if they are now trying to prove that our income is not always this high, will this make my student loans a problem again. I just finished school last month as well.
Any advise is appreciated.
Can you qualify for a USDA loan if you defaulted on a FHA loan 10 years ago?
It depends on how the foreclosure was settled. If the home was sold, and FHA suffered a loss on the property, and there is a deficiency balance, it may still show when the lender pulls the CAIVRS search.
can you have a home and get approved for a usda, loan
I am currently in the process of purchasing a home with a USDA loan. I have been pre approved and the lender is about to send my file to the USDA for review. Can anyone tell me the chances that it will be approved by the USDA? The closing date is set for 2 weeks from now and I’m sort anxious wondering if it’ll actually work out. First time home buyer so I’m still trying to understand all of this.
I am on the same boat, closing date is 2/28 and they are just now submiting everything to USDA. Let me know how it works out for you! Fingers crossed and best of luck.
Me too! My file is getting sent down today or tomorrow and I am suppose to close on the 16th of March.
I am waiting for final approval. The Mortgage guy sent it in to USDA on February 29th. I would love to hear all of your updates. Please let me know.
How did it all work out in the end?
Can you owe on the land you want to build on and still qualify for a usda loan, and also does it matter if this land happens to be a river lot?
Does the USDA loan on doublewide mobile homes – that are already on an acre of land?
It depends on the foundation.
My husband and I own our current home. We both have excellent credit ratings. We have more than a 41% debt to income ratio. We have had a much higher d to i for years and have never defaulted on a single payment for anything. If we sold our home and tried to use the USDA to get a new loan, could they possibly still approve us with a high d to i if we are looking to purchase a house that would drop our monthly mortgage payment $300 or so considering our history?
Currently trying to get a USDA loan and working with two loan officers. One is very hesitant and wants us to wait to make offers until we get the pre-approval; whereas the other one is confident that we will get the pre-approval. My credit score is fine, but my husbands is kinda lower, but still qualifies. We have been living with my parents to save money for the past 6 months and therefore according to the one loan officer, the USDA says we now have no rental history. It is a very frustrating process especially because we are being told two different things. Anyone else have a hard time obtaining a USDA loan?
Can you get a USDA loan on a manufactured home on block?
USDA has been doing some loans in my area (SW FL) and I was wondering if they will do loans on condo’s as well as single family homes. If yes, what are the USDA guidelines for a condo community?
I have a few bumps and bruises on my credit. Is there a “typial” credit score that is required for a USDA loan? For example, the typical 620 score required for an FHA loan. My wife and I came across a few homes we like that qualify under the USDA, and would like to potentially move forward with the purchse. We have an income that qualifies under the limits, but my biggest concern is the credit history.
usda requires your credit score to be 640
Actually, the credit score requirements for a FHA loan just changed to 640 as well. My husband finally made it to 620, but he was a month too late when the requirements changed
Gah! That very thing happened to us. We have been working on our credit for months, finally got preapproval for FHA adn then started house hunting. When we finally found a house, the requirements changed and we were 8 points short! Now, hopefully we are up over the 640 neededand are about to try again.
Does anyone know if the USDA will finance a home that is on pier and beam (post)? I’ve heard that they won’t.
Thanks!
Hi,
I was told that USDA Loans have minimum PMI (about 1/4) and not “NO PMI”, can you please explain PMI in USDA Loans?
Also, I’m wondering if I will be qualified for a home within city limit?
Thanks!
Bryant,
Here is the fee calculator it requires Excel.
https://usdalinc.sc.egov.usda.gov/docs/rd/sfh/loanorigination/Guarantee%20Upfront%20and%20Annual%20Fee%20Calculator%20pv1.1.xlsm
no..with USDA it has to be in the county
You may qulify for a home in city limits provided the cencus falls under their guidelines as rural. I’m not sure of actual no., but I researched this well last fall.
Also your income and credit are factors.
we are living rent free in a home my parents
own, but would like to buy it since i have
graduated., is this ok for a usda loan, to buy
from my parents?
As long as it meets the criteria of USDA such as urban area, under 10 acres…etc. Also, look to see that the home is owned solely by your parents without any problems…USDA has strict policies in accordance to their rules about the home. Good luck!
Do you know the percentage of the offering price that can be used for closing costs? If the loan will be $165000 -how much can we put as closing costs for the seller’s concession?
Highlights of the USDA Guaranteed Rural Housing Loan Program
Loans may go up to 102% (With Guarantee fee included)
No downpayment is required
Mortgages are 30-year fixed rate at market interest rates
Sellers may contribute to the buyer’s closing costs
Home buyers make application with participating lenders
Buyers must personally occupy the dwelling following the purchase
Section 502 Direct housing loans may be used to refinance existing USDA loans or for a home purchase. When purchasing a home with a USDA loan there is an upfront fee of 2% charged to the mortgage lender. A Refinance loan carries .5% upfront fee. This fee usually passed on to the homeowner and included in the closing costs. USDA Guaranteed Home Loans are subject to investor guidelines provided by the servicer.
What are the requirements of the home and home- seller when he sells to a buyer financing the home with usda?
Usually its 3% but your lender should be able to tell you that for sure.
I want to get a USDA direct loan, I do not have the credit for most loans…how do I get one? I have the list of approved lenders but the list is kinda out dated, one company was taken over by another bank and they do not do direct loans…please help
Look at the criteria for USDA guidelines for your future purchase. You can research a property to see if it is available through USDA. Your credit score must be 640 or better. You need to look at your income as well…too much income will disqualify you as well.
Best of luck…any questions email me!
Are you sure about the 640 score? FHA only requires a 620 average and USDA states they accept a reasonable score.
Again, the FHA requirements just changed to 640
We just were approved for an FHA loan with a score of 607 when the house we wanted was a fixer upper we applied for the usda loan instead and were still pre-approved.
I am going to apply for the usda direct loan. Problem- I have an 11 year old judgment that does not show on my credit report (sol expired) but is being garnished from my wages. I owe approx 1400 on it. I know the usda wants them paid 12 months prior to application. Question: Because my score and income are sufficient and the judgment is not on my report or being reported in my county and under my maiden name, will the usda reject my application even though i will pay it off prior to closing? Should I just wait to apply? My husban and I are renting the home we wish to buy at 850 a month. The rent will increase to 950 in July when our lease renews, also we think the landlord will put it on the market.He’s told us to let him know when were ready and we can work something out although he hasnt quoted us a price. Ive run the numbers and highest price possible we could own it for about 625 a month instead of the 8 or 950.
Dee,
My best advice would be to sit down with your loan officer and lay all your cards on the table. If it is not affecting your debt-to-income ratio a sincere letter to the under writer may suffice. Best of luck let me know how it goes.
Sam
Still havent gotten the nerve to apply. Establishing my husbands credit score. I did call the usda and ask them about the judgment issue as well as the credit score. I wanted to know if they waived the credit details if the score was 640. I was told that they did by another usda rep in Dec. This rep said they look at everything. No negatives and credit lines need to have 12 of history even if the credit score is 640 or better. She said that we should apply and explain the 11 year judgment seeing that it is old and I have been paying on it. When asked how soon I could reapply if I am denied she said six months.Our lease is up in July. Still waiting. I would like to settle the judgment even though its not fed or showing on my report. I dont want to omit it from the application. Hopefully they wont look at the short credit history for my husband.
Is mortgage ins.required with a USDA Guaranteed Loan and if so,who pays the premium?
No PMI is required with a usda loan, thats one of the benefits
SAM THANK YOU FOR YOUR PROMPT REPLY BUT I HAVE OTHER QUESTIONS I AM WORKING WITH A REALTOR SHES CHECKING INTO THIS FOR ME BUT WITH A DECLINING HOUSING MARKET WHY WOULD THE PAYBACK SUBSTIDITY BE SO HIGH
Marcy,
This link should answer your question.
http://www.rurdev.usda.gov/vt/Housing%20Programs/Single%20Family%20Housing/Payoff%20Instructions%20for%20a%20Subsidized%20Home%20Loan.pdf
I CURRENTLY HAVE A USDA LOAN BEEN HERE ABOUT 8 1/2 YEARS WOULD LIKE TO SELL MY HOME WHAT ALL IS
INVOLVED IN THIS WHERE DO I GO FROM HERE???
Marcy,
A good real estate agent to help you get your house out in the market would be my first step. The proceeds from the sale will cover the mortgage?
Sam
WE WERE LATE ONCE LAST APRIL, OTHERWISE NO LATES SHOULD THIE EFFECT OUR LOAN. IY WAS BANK OF AMERICA
We know we can and will speak to our USDA contact but wanted to get some insight before……we are USDA pre-approved for 150k; found a 1925 950sf home and barn on 2.3 acre farmstead purchasing for 130k – a portion of land is in flood plain but not the house/barn. 1. will the house appraise…what is USDA criteria to accept our great find! 2. If it doesn’t meet standard can we use the extra 20k with a contract from builder to make the required improvements? 3. If it does meet standards can we access that 20k to make improvements such as new hvac system? 4. A portion (not house/barn) is in flood plain…will that impact approval?
What is the debt ratio top and bottom limits
with the USDA home purchase program?
For a manual underwrite I believe it is 29/41.
The PITI and TD ratios may be exceeded up to two percentage points without
a ratio waiver request submitted to Rural Development. If PITI ratio exceeds
31% and/or TD ratio exceeds 43% a debt ratio waiver is required. This does
not apply to GUS “Accept” underwriting recommendations.
Can a home owner, with a USDA loan, rent this home to another family?
not an expert…but logic tells me that the decision is yours to make once you own a property…perhaps the fine print will say in your bank docs that you are supposed to be living there for a period of time…but life situations sometimes require a move and practically nothing can really stop you
If it is a Direct Loan with the USDA then you must tell them before you can rent it out, and you can only rent it out for 3 years. This is because the mortgage with the direct loan is based on your income. If you rent it out then it is no longer based on your income and the full mortgage amount is due.
Filed chapter 7 and it was discharged in 10-2008 in the bankruptcy we included our home. The bank did not officially foreclose on the home until 10-2009. Since the discharge of the bankruptcy relieved us of all obligations of the home wouldn’t the lender and underwriter go by the date of the discharge to approve our loan? I have heard that I still have to wait 36 months from the date of foreclosure.
USDA will go by discharge date.. The catch 22 is which date the bank/lender will go by. Most will go by the foreclosure date. But if you look hard enough, some will go by the discharge.Message back and I could tell you who we used, because we had the same situation.
Had a bk discharged in july 2008 and short saled the house in aug 2009. I thought to be considered for a home loan, you need to be 3 years out from your short sale. Do you know anything about this? Thnx for any help.
I had this issue a few years back. We were more than three years out from our bankruptcy, but a week before we were set to move, we discovered a wonderful thing called CAIVERS. Apparently, the bank took several months to sell the property and our purchase fell through, with the onus on us (we’d already paid all of the appropriate fees, such as the inspection and appraisal).
Debbie,
Is there a set waiting period following Chapter 7 discharge to qualify for the USDA mortgage loans?
36 months
USDA does not have set waiting period, however, most lenders require 24 months from the date of discharge.
USDA absolutely does have a set waiting period. It is 36 months from the date of discharge of a Chapter 7 BK. Sometimes adverse credit waivers can be obtained. You must have substantial compensating factors and no layered risks in that case, though.
does USDA do loan on house with hauled water, not typical for the area?
Debbie,
I would recommend that you speak with your local Rural Development Office on this matter. Here is a link http://www.rurdev.usda.gov/recd_map.html