Want to Qualify for a USDA Home Loan?
“Do I qualify for a USDA home loan?” is a question that many ask themselves when pursuing the thought of a buying a new home. A USDA loan is a program offered by the U.S Department of Agriculture providing a home loan with zero down payment. In order to qualify for this loan, certain criteria such as the location of the home and income levels are taken into consideration.
The USDA loan is often referred to as the USDA Rural Development Loan or “Rural Housing loan.” The name of the loan makes buyers think these loans can only be applied to rural areas far away from everything, but that isn’t the case.
Location, location, location – Yes, a home must be in a “rural area.” But you would be surprised on what that definition really means. Usually, the areas with a population less than 20,000 would be considered rural, but often bigger towns and cities can qualify too. In fact 97% of the country is considered “rural” based on the USDA eligibility map. That leaves only 3% of the country that wouldn’t qualify as “rural.” Essentially, as long as you’re not looking to buy within a major metropolitan area, your chances of buying (or wanting to buy) a home in a “rural” area of the country pretty good, I’d say.
Household Income – USDA loans are offered to moderate income households, which is defined as “households earning up to 115% of that areas median income.” Household income means that all income coming in to the household is taken into consideration when determine eligibility. The income limit will also vary depending on the number of people in the household. Someone living in an area where the median income is $90,000 a year per single family vs someone living in an area where the median income is $50,000 may find it easier to qualify. If you lived in the lower median income area, you would need to earn less income to qualify.
Credit Score – A credit score of 680 or higher is preferred from the USDA loan program. However, those with less than perfect credit or no credit can also be approved with additional documents as proof of on-time payments like rent, childcare, utilities and other recurring bills.
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Interested in applying for a USDA Home Loan? For more information on applying visit USDA.gov