USDA Loan Eligibility and Qualification Criteria

Can anyone qualify for a USDA loan or are there criteria you must meet?

2 Answers

In order to qualify for a USDA Loan also known as Section 502 loans, there are income limits. The qualifing income limits are a percentage of the "median income for the area" as defined by HUD. (I will provide you with a link).  These loans are geared toward helping low-income individuals and families the opportunity to purchase a home in a rural area. Link: There are minimum credit criteria although there is not a minimum down payment requirement.

There are minimum standards for the home you seek to purchase.

Funds may also be used to rennovate, repair, rebuild, relocate a home or purchase and prepare a site.

The United States Department of Agriculture facilitates this program and I've enclosed their link: Best of Luck purchasing a new home!

USDA loans confer some special benefits. There is no down payment requirement. In addition, the interest rate may be subsidized for those with very low incomes. The loans are made more affordable because they feature 33 year terms. You qualify for USDA loans by purchasing property in designated rural areas (and that doesn't necessarily mean the boonies. Many neighborhoods just outside larger MSAs are still considered rural by the USDA.

USDA Rural Development administers a couple of  programs: Guarantee and Direct.

Their Direct program is funded directly (hence the name “direct”) through the rural development office. To be eligible, your income can be only 80% of the median income for the area.

The Guarantee program is funded through USDA-approved lenders and brokers. It is a guarantee **program (like FHA and VA) with no subsidies, and the income guidelines allow up to 115% of the median income after certain adjustments. A good loan officer who specializes in these products should be able to help you determine how your income would be considered.

The 100% LTV mortgage amount is determined by the appraised value of the property.

** Credit underwriting is flexible and the guidelines have no minimum buyer out-of-pocket expense and no maximum for seller concessions. Note: some lender policies may be more restrictive, so if it’s the lender guidelines shooting down your application and not the USDA’s,  another lender may be able to approve you.