The US government offers a range of loan programs for homebuyers, and each one has its own unique set of requirements.
One of these programs is called a USDA loan, so it’s important to know the details if you’re interested in the program.
Read on to learn how to qualify for a USDA home loan to decide whether it’s the right option for you.
Minimum USDA Home Loan Requirements
Before you look at how to qualify for a USDA home loan, there are few minimum requirements that all buyers must meet. First, you must be an American citizen or a legal permanent resident.
Ideally, most borrowers should also have a credit score of at least 640 and be able to show proof of stable, dependable income. Your credit report should show a willingness to repay the mortgage with about 12 months or more of no late payments or collections.
In addition to these requirements, your adjusted household income must be equal to or less than 115% of the median income in your area. Finally, the property you want must be used as the primary residence and located in a qualified rural area.
How to Qualify for a USDA Home Loan: Income Limits
The USDA sets an amount for the maximum adjusted annual income your household can bring in at the time of loan approval. The purpose of these limits is to ensure that people receiving the loan meet the low to moderate-income group of people who need to take advantage of the program.
Currently, these general income limits are $91,900 for a one to a four-member household. If your household contains five to eight members, the limits jump to $121,300.
Official USDA income limits may vary based on your household size and your location. The base income limit is set at 115% of the area’s median household income. They’ll compare your total qualifying income to the regional median income in your location.
Homes That Qualify for USDA Loan
In order to qualify for the program, the property must be located in a rural area that is not part of a city or urban area. The property must be accessible from the road or with a driveway and must have adequate utilities and be connected to a sewer or septic system.
You cannot use your home as an income-producing property. However, homes that have an existing greenhouse, farm, silo, or other items that are no longer used for commercial purposes may still be eligible.
The USDA program does include manufactured homes, new construction, condos, townhouses, and even foreclosed and short-sale properties. Click this link to get more information on usda loans.
Is the USDA Program Right for You?
Now that you know the basics about how to qualify for a USDA home loan, you can decide if it’s the right loan program for you. If you want to live in a rural area and get a great rate, it’s certainly something to consider.
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