Key Benefits of USDA Loans
USDA loans are backed by the U.S. Department of Agriculture and designed to promote homeownership in rural and eligible suburban areas.
No Down Payment Required
USDA loans offer 100% financing, meaning you can purchase a home with zero down payment, making homeownership more accessible.
Competitive Interest Rates
USDA loans typically offer lower interest rates compared to conventional loans, helping you save money over the life of your loan.
Lower Mortgage Insurance
While USDA loans do require mortgage insurance, the premiums are typically lower than those for FHA loans or conventional loans with less than 20% down.
Flexible Credit Requirements
USDA loans often have more flexible credit requirements than conventional loans, with a recommended minimum score of 640, though exceptions may be possible.
USDA Loan Eligibility
Property Location
The property must be located in a USDA-eligible rural or suburban area. Many areas outside major cities qualify, even some that might surprise you.
Income Limits
Your household income must not exceed 115% of the median income for the area. These limits vary by location and household size.
Primary Residence
The home must be your primary residence. USDA loans cannot be used for investment properties, vacation homes, or second homes.
U.S. Citizenship or Permanent Residency
You must be a U.S. citizen, U.S. non-citizen national, or Qualified Alien to be eligible for a USDA loan.
Debt-to-Income Ratio
Your monthly mortgage payment should not exceed 29% of your monthly income, and total debt payments should not exceed 41% of your income.
Credit History
While there is no set minimum credit score, a score of 640 or higher will streamline the application process. Lower scores may require additional documentation.
Property Requirements
Not all properties qualify for USDA financing. Here are the key requirements:
Location Eligibility
The property must be located in a USDA-designated rural or suburban area. Many areas within commuting distance of major cities may qualify.
Property Types
Eligible properties include single-family homes, townhouses, condos, and modular homes. The property must be modest in size, design, and cost.
Condition Standards
The home must meet USDA property standards, be in good repair, and have adequate utilities, water, and wastewater disposal systems.
No Income-Producing Features
The property cannot have features primarily designed for income-producing activities, such as large barns or extensive farmland.
The USDA Loan Process
Pre-Qualification
We will review your financial situation to determine if you meet the basic requirements for a USDA loan and estimate how much you might be able to borrow.
Property Search
Work with your real estate agent to find a home in a USDA-eligible area that meets program requirements and falls within your budget.
Loan Application
Complete a full mortgage application and provide all necessary documentation, including income verification, employment history, and credit information.
Property Appraisal
A USDA-approved appraiser will evaluate the property to ensure it meets all program requirements and to determine its market value.
Underwriting
Your loan application will go through two underwriting processes: first with the lender and then with the USDA for final approval.
Closing
Once approved, you will sign your final loan documents and receive the keys to your new home!
Frequently Asked Questions
How do I know if a property is in an eligible area?
The USDA provides an online eligibility map that allows you to check if a property is in an eligible rural area. We can help you navigate this tool during the pre-qualification process.
What are the USDA loan income limits?
Income limits vary by location and household size, typically set at 115% of the median income for the area. We can help determine if your income falls within the limits for your area.
What is the USDA guarantee fee?
USDA loans require an upfront guarantee fee (currently 1% of the loan amount) and an annual fee (currently 0.35% of the outstanding loan balance). These fees help fund the USDA loan program.
How long does the USDA loan process take?
The USDA loan process typically takes 30-45 days, which is slightly longer than conventional loans due to the additional USDA approval step. However, we work diligently to ensure the process moves as quickly as possible.