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Who Qualifies for a USDA Loan?

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Homebuying is complicated no matter who you are, but certain government programs exist to help make the process easier. The U.S. Department of Agriculture (USDA) mortgage program exists to give people access to home loans should they prefer real estate in rural or suburban areas.

What Are the Qualifications for a USDA Loan?
USDA home loans are zero-down-payment mortgages for eligible homebuyers. But who exactly qualifies for these loans? The following is a quick run-down of the requirements for USDA loan qualification:

Minimum Requirements
Any interested homebuyer should first consider the minimum requirements, which include:

U.S. citizenship or permanent residency.

The ability to prove creditworthiness. Applicants with a credit score of at least 640 have the best chance at having their loan application approved.

Proof of stable and dependable income.

Evidence of willingness to repay the mortgage, which usually comes in the form of 12 months with no late payments or collections.

The applicant’s household income must be equal to or less than 115 percent of the median income of the area in which the property is located.

The property must be located in a qualified rural area and must serve as the applicant’s primary residence.

USDA Loan Credit Requirements
While it is possible for applicants with a credit score under 640 to be approved, those with the requisite scores go through the process much more quickly. To determine whether or not an applicant has appropriate credit, the USDA may review the applicant’s credit score, repayment patterns, credit use, and length of credit history. Applicants with no credit history may still be eligible but may require verification from alternate sources, such as rent or utility payments.

USDA Loan Income Requirements
In determining an applicant’s eligibility for a USDA loan, the following may be considered regarding income:

Annual household income

Adjusted annual household income

USDA qualifying income

Repayment income

Applicants must have a stable and verifiable income. Loan underwriters will check on these requirements to determine eligibility. These loans are earmarked for families in low-to-moderate income brackets, so there are caps on familial income when it comes to loan approval.

USDA Loan Location Requirements
While the word “rural” makes it sound as though these loans only can be applied to purchasing farmland or homes in small towns, the USDA definition of “rural” is fairly liberal and can apply to some suburbs. Nearly 97 percent of U.S. land is eligible for these mortgages.

USDA Loan Property Requirements
The basic property requirements are that the home not only must be the applicant’s primary residence, but it also must have direct access to a street, road, or driveway and must have adequate utilities, water, and wastewater disposal. The property cannot be income-generating, but if there are barns, silos, or livestock facilities that are no longer used for commercial operation, the property could still be eligible.

Work with an Experienced Lender
There are quite a few requirements for these USDA loans, but for the right person, they are a popular path to home ownership. Contact a loan officer at DC Lending if you have any questions about USDA loans or would like to know if you qualify for this special type of mortgage.

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