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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

House in Hands

A 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.

USDA Home Loan Guidelines

  1. Qualifying for a Guaranteed Rural Home loan
  2. 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.)
  3. Meet moderate income limits for your specific area.
  4. Have a credit history which indicates a reasonable ability to pay obligations as they come due.
  5. 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.