What Are the Requirements for a USDA Loan?

Learn all about the USDA loan program.

Nice rural homeThe USDA home loan program is a government-backed mortgage program that provides loans for eligible homebuyers with low to moderate incomes.

To be eligible for a USDA loan, you must meet certain income and credit requirements. You must also be a U.S. citizen or permanent resident and have a valid Social Security number. Additionally, the home you're purchasing must be located in an eligible rural or suburban area.

If you meet all the eligibility requirements, you can apply for a USDA loan through a participating lender. The loan process is similar to other types of home loans, and you'll need to provide the lender with documentation such as your income and employment history, as well as your credit report.

The USDA home loan program may be able to help you finance your dream home whether you live in a rural or suburban area. If you meet the approval guidelines, you may apply for a loan through a participating lender.

Benefits of a USDA Loan

The USDA home loan program offers many benefits to borrowers. Some of these benefits include low interest rates, no down payment requirements, and flexible credit guidelines. This program can help you save money on your monthly mortgage payments and can make it easier to qualify for a loan.

Eligibility Requirements for a USDA Loan

If you're looking for a zero-down mortgage option, you may want to consider the USDA home loan program. This program is available to those who meet certain income and credit requirements, and can help you finance a home in a rural or suburban area.

In order to be eligible for a USDA home loan, you must have a household income that is below the program's limit.

You'll also need to have good credit and demonstrate a willingness to repay your loan. If you meet these requirements, you may be able to get a USDA home loan with a competitive interest rate and no down payment.

To be eligible for a USDA home loan, you must meet the following requirements:

  • The property must be in a rural or suburban location. The USDA website can assist borrowers in determining if their property qualifies.
  • A borrower's income must be moderate to low. The maximum household income varies depending on where you live. See 2022 income limits
  • The borrower's credit score must be at least 640 in order to qualify.
  • Certain debt-to-income ratios must be met by the borrower.

USDA Home Loan Programs

New home buyersThe USDA offers a few different home loan programs, including:

The Rural Development Guaranteed Housing Loan Program is for people looking to buy a house in a rural area. The USDA will guarantee the loan, so you may be able to get a loan with a lower interest rate. Read more

The USDA Direct Housing Loan Program - Borrowers must meet certain income requirements to be eligible for a USDA Direct Loan. The maximum household income is equal to 50% of the median income in the area. Borrowers must also buy a house in a rural area, which the USDA defines as an area with less than 10,000 people.

USDA Direct Loans provide a number of advantages over other types of mortgages. These loans feature low interest rates and no obligation for a down payment and the mortgage insurance is less than other housing loans.

Direct applications for USDA Direct loans must be submitted to a USDA office. Read more

The Rural Development 502 Home Repair Loan Program provides low-interest, fixed-rate loans to help rural homeowners make essential repairs to their homes.

The program is designed to improve the quality of life for rural homeowners by making necessary repairs, which may include roofing, painting, plumbing, and electrical work. This program is for people who own a home in a rural area, and need repairs that are too expensive to do on their own. Read more

Closing Costs on a USDA Loan

The closing costs on a USDA loan vary depending on the lender and property location, but are typically between 2 and 4 percent of the loan amount. This includes the costs of the loan application, the appraisal, the title search and insurance, and other fees.

In addition to the usual closing costs for a home loan, the USDA also requires a Guarantee fee. The cost of the guarantee fee is 1% of the loan amount. The Guarantee fee can be rolled into the loan, paid in cash or paid by the home seller as part of the seller concession.

There is monthly fee as well. The monthly cost is 0.0002916 X loan amount (or balance).
Here's an example:
Loan amount (200,000)  X 0.0002916 = $58.32 included in the mortgage payment. Read more

USDA Loan Term

The USDA loan program only offers a 30-year fixed-rate for the Guarantee loan program.

The Direct loan program is usually 33 years, but can stretch the loan up to 38 years in some cases.

The rate of interest is fixed. Adjustable rate mortgages are not available.


USDA Maximum Loan Amount

USDA Guaranteed Loans - There are no loan limits with the Guarantee program. The applicant's debt to income establishes the maximum loan amount. Application is made through an approved lender.

USDA Direct Loans - These loans are issued directly by the federal government to very low- and low-income homeowners, who earn at or less than 50 percent of the area's median income. The USDA loan limits apply, and rather than a mortgage lender, you submit your application to the USDA directly.

USDA Down Payment Loan

The down payment for a USDA home loan program is 0%.

A down payment is not required for USDA home loan programs. This makes it an attractive option for many home buyers who may not have the funds to make a large down payment.

USDA Loan Refinance Programs

In addition to the two purchase programs, the USDA offers three refinance programs.

  • USDA Streamline Refinance
  • Streamline-Assist Refinance
  • Non-Streamline USDA Refinance

If you're looking to refinance your home and save money, you may want to consider one of the USDA refinance programs. These programs can help you lower your interest rate and monthly payment, making it easier to afford your home.

There are two main USDA refinance programs: the Guaranteed Rural Housing program and the Direct Loan program.

The Guaranteed Rural Housing program is available to homeowners with USDA-backed loans. This program offers a lower interest rate and may not require an appraisal.

There are three options with the Guarantee and Direct loan programs.

Streamline-Assist Refinance

The Streamline-Assist Refinance program is a great way to get a lower interest rate on your mortgage. The program is available to homeowners with a USDA-backed mortgage who are current on their payments. To be eligible, you must have made your last 12 mortgage payments on time and must not have been delinquent on your mortgage at any time in the past 12 months. Read more

The program offers several benefits, including a lower interest rate, no appraisal required, and no credit score requirements. If you are considering refinancing your home, the Streamline-Assist Refinance program may be a great option for you. The Streamline-Assist Refinance program is very popular with USDA homeowners.

Standard Streamline Refinance

The USDA Standard Streamline Refinance Loan Program is a great way to lower your monthly mortgage payments and save money on interest. However, there are some requirements you must meet in order to qualify.

First, you must have a USDA-backed loan. This means that your loan was originated through the USDA Rural Development Guaranteed Housing Loan Program.

Second, you must be current on your mortgage payments. This means that you have made all of your payments on time, and you are not more than 30 days late on any payments.

Third, you must have made at least 12 monthly payments on your USDA-backed loan. Read more

Non-Streamline USDA Refinance

If you're looking to refinance your home and are located in a non-streamline USDA area, you may be wondering what your options are. While you may not be able to take advantage of the streamlined process, there are still ways to refinance your home through the USDA.

Here's what you need to know.
The first thing to understand is that the USDA offers two types of refinance programs – streamline and non-streamline. The streamline program is only available to those who are currently in a USDA-backed loan.

The good news is that the non-streamline process is not as complicated as it may sound. In fact, it's actually pretty similar to the process you went through when you originally obtained your mortgage. You'll just need to provide some additional documentation this time around.

Here's what you'll need to do to refinance your home through the USDA's non-streamline process:

1. Get a new appraisal. This will help determine the current value of your home.
2. Get a new credit report. This will help show the USDA that you're still a responsible borrower.
3. Get new income documentation. This will help show the USDA that you're still able to make your mortgage payments.
4. Complete a new loan application. This will provide the USDA with all of the information they need to process your refinance.
5. Sign and return all loan documents. Once your loan is approved, you'll need to sign and return all loan documents.

The USDA's non-streamline process may take a little longer than the streamlined process, but it's still a great option for those who are looking to refinance their home. If you're interested in learning more, be sure to contact a USDA lender today.

Interest Rate for a USDA Loan

If you're looking for a rural home loan with no down payment, the USDA home loan program could be the right fit for you. But how do USDA mortgage interest rates compare to other loan programs?

The interest rate for a USDA home loan is typically lower than for other loan programs. This is because the USDA program is backed by the government, which allows lenders to offer lower rates.

How much lower depends on a number of factors, including your credit score, the type of loan you're getting, and the term of the loan. But in general, you can expect to get a lower interest rate with a USDA loan than with a conventional mortgage.

How to Apply for a USDA Home Loan?

The first step in applying for a USDA home loan is to contact a participating lender in your area. Lenders can help you determine if you are eligible for a USDA home loan and can guide you through the application process. Take a look at our preferred lenders below.

Conclusion

In conclusion, the USDA home loan program is a great option for low to moderate income borrowers who want to buy a home. The program offers competitive interest rates, and there are no down payment or mortgage insurance requirements. Borrowers should contact their local USDA service center to learn more about the program and determine if they are eligible.