USDA Home Mortgage Guidelines and Eligibility Requirements
Home Buyers who meet USDA home mortgage guidelines can qualify for USDA loans with 100% financing. with no closing costs by using seller concessions and lender credit. Many people do not realize that USDA loans are not just for a home purchase in rural areas. Many suburbs of larger cities and towns are designed in USDA-designated areas.
USDA home mortgage guidelines have been created with lenient agency guidelines to promote homeownership in rural America. In the following paragraphs, we will cover the USDA home mortgage guidelines on home purchase loans.
Why Are USDA Loans So Attractive For Homebuyers?
Homebuyers who like to live in rural or suburban areas with larger lots and not on little lots can benefit from this unique loan program. USDA Rural Development offers 100% financing for homebuyers in areas designed to be rural in all 50 states.
What Are Key USDA Home Mortgage Guidelines
Here are the key USDA Home Mortgage Guidelines And Eligibility Requirements:
- 100% down payment where there is no down payment required by buyers
- Homes need to be located in areas designated as rural areas by Rural Development
- Thousands of counties throughout the United States are designated rural areas
- Homebuyers can purchase acreage with USDA loans but cannot purchase working farms
- Both the borrowers and the property needs to qualify
- The borrower’s household family income cannot exceed the maximum income limits set for the county
However, gross qualified income needs to meet the debt-to-income ratio requirements.
USDA Loan Credit Requirements
Non-QM Mortgage Brokers is a national mortgage company with no overlays on government and conventional loans. Besides the area of the home being located in a designated county, the borrowers need to meet credit and income guidelines. Here are the basic credit eligibility requirements:
- Minimum 580 credit scores
- Need to get approve/eligible per Automated Underwriting System approval
- To get an AUS Approval per automated underwriting system findings, timely in the past 12 months is required
- The 3-year waiting period after Chapter 7 bankruptcy, foreclosure, deed in lieu, short sale
- Re-established credit after housing event and/or bankruptcy
- No late payments after housing event and/or bankruptcy
- Three to five aged credit tradelines are highly recommended
USDA Home Mortgage Guidelines On Income And DTI
Most loan programs prefer more income from borrowers. However, USDA Loans have a cap on the maximum income allowed in order to be eligible to qualify. The maximum debt-to-income ratio is capped at 29% front end and 41% back end. Deferred Student Loans that are deferred for longer than 12 months are not exempt from student loan calculations.
Student Loan Guidelines on USDA Loans
USDA is similar to FHA Loans when it comes to deferred student loans. Agency guidelines are for mortgage underwriters to take 1.0% of the outstanding student loan balance and use that as a hypothetical monthly debt. USDA Mortgage Guidelines on income are differentiated by the number of people in the household of borrowers.
There are breakdowns in maximum household income limits which depends on the number of people in the household and the area of the property. For example, for a household of 5 in a certain county, the maximum income for borrowers may be capped at $121,700.
How Much Money is Needed To Purchase Home With USDA Home Loans
There are two types of payment home buyers need when purchasing a home.
- Down Payment
- Closing Costs
Qualified homebuyers can purchase homes in a rural designated area anywhere in the United States with no money down and 100% financing. Most homebuyers do not have to worry about coming up with any closing costs. USDA allows sellers to contribute up to 6% in seller concessions for home buyers closing costs.
USDA Loans versus Other Mortgage Loan Options
All seller concessions need to be used by home buyers. If there are seller concession overages, it needs to go back to a home seller. However, if there are any seller concession overages, they can be used to buy discount points to buy down mortgage rates.
USDA, besides VA loans, is the only loan program that offers 100% financing. If home buyers are short of paying for closing costs, the mortgage lender can help with covering closing costs with a lender credit.
Qualifying For USDA Home Loans With a Lender With No Overlays
Home Buyers who want to start the qualification and pre-approval mortgage process with a national direct lender with no overlays on government and conventional loans can contact us at Non-QM Mortgage Brokers at 800-900-8569. Text us for a faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays. We close 100% of all of our pre-approvals since all of our pre-approvals are loan commitments to lend that have been underwritten and signed off by our mortgage underwriters.
This blog on USDA Home Mortgage Guidelines was updated and published on November 3rd, 2022.
