USDA Loans Characteristics

• Down Payment 0%
• Credit Score: No minimum, 640 is lender standard
• Mortgage Insurance: Upfront guarantee fee 1%, Annual guarantee fee 0.35%
• DTI: 41% back-end ratio
• Loan limits for single-family homes in low-cost areas
• N/A Closing cost:
  $0 USDA loans are unique as they base the max loan amount solely on the property’s appraised value. Supported by an appraised value that accommodates the purchase price + settlement costs (closing costs + prepaid expenses), there is truly no money required at closing. The program’s ability to finance settlement costs is unique to the USDA loan program. Ensure that your lender does not overlay guidelines that supersede any of the program’s benefits.

Qualifying USDA Program:

USDA’s program generally follows FHA’s guidelines, but the agency’s goal is to support rural housing. In doing so, they have two distinct qualifiers:

a. Property Eligibility

Let’s look at an example:

These eligible areas are based on recent census data and then polished with criteria that USDA keeps to themselves. Keep in mind that USDA definition of “rural” is relative. In the Texas State “rural” is different than “rural” in New Jersey, as population densities are far different.

To see the USDA eligibility mapping visit https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp

b. Household Income Caps This program’s guidelines distinguishes between two separate tiers of household income caps: 1-4 and 5+ person households. Married with 3 dependents? You’re in the 5+ (higher income cap) tier. Even when income calculations exceed the USDA caps, know that there are deductions to help your scenario fit. Subtracting documented childcare expenses is the most common deduction for lowering your household income calculation.

There is a handy USDA calculator that accounts for common deduction, visit the site below: https://eligibility.sc.egov.usda.gov/eligibility/incomeEligibilityAction.do?pageAction=state

Your USDA lender can help define and calculate deductions. If you think this program could be a good fit for your scenario, just ask your preferred lender about it.