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USDA Loans

What is a USDA Home Loan?

USDA Guaranteed Loans are mortgages offered by lenders. The U.S. Department of Agriculture guarantees these mortgages to encourage homeownership in less densely populated areas of the country. The USDA acts as the guarantor for the mortgage, and a lender issues you the loan.

Features of USDA Loans

    • 100% financing available

    • Low monthly mortgage insurance with a 1.0% Guaranty Fee that can be rolled into the loan

    • Generous income guidelines

    • Low-interest rates

    • Lender credits available to offset closing costs

What Properties Are Eligible For The USDA Loan

The property you’re purchasing must fall within approved rural areas to qualify for a USDA loan. Despite the program’s reputation for serving primarily rural areas, 97% of the US land mass is eligible for USDA financing. While you can’t buy in an urban area with a USDA loan, chances are there are properties near you that qualify.

Mortgage Insurance for USDA Loans 

Mortgage insurance for USDA loans is less expensive than it is for competing loan products, like conventional or FHA mortgages. The USDA requires a Guaranty Fee of 1.00% of the loan amount, and a monthly mortgage insurance fee of 0.35% of the loan balance. For example, if the home you are purchasing costs $500,000, you’ll owe $5,050 upfront (there is a slight fee charged by USDA when you finance the Guaranty Fee in your loan) and $145.83 per month.

What Are The Credit Requirements For USDA Loan?

Applicants must show stable income and a credit history that demonstrates the ability and willingness to repay the loan. There is no minimum credit requirement for the USDA loan. However, applicants with a credit score of 640 or higher are eligible for the USDA’s automated underwriting system. Applicants below the 640 mark may still be eligible, but may be subject to manual underwriting, which can mean more stringent guidelines.


What are The Minimum Qualifications For USDA Loans?

  • S. citizenship or permanent residency

  • Ability to prove creditworthiness, a minimum credit score of 600

  • Stable and dependable employment for the last 2 years

  • A willingness to repay the mortgage – generally 12 months of no late payments or collections

  • Household members must be at or below income guidelines

  • The property serves as the primary residence and is in a qualified rural area

Lenders may have their own internal guidelines and requirements in addition to those set by the USDA’s Rural Development program.

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