What Is a USDA Home Loan?

A USDA loan is special type of a zero down payment mortgage that eligible home buyers in rural and suburban areas can get through the USDA Loan Program, which is backed by the United States Department of Agriculture (USDA). It’s one of the government’s least-known mortgage assistance programs available.

The main type of USDA home loan program is called a USDA Guarantee Loan. These loans work like how an FHA or VA home loan would in terms of low or no down payment. Keep in mind, you may be required to pay private mortgage insurance each month. A USDA-approved lender, like Churchill Mortgage, issues this type of loan.

Applicants for a USDA Home Loan must*:

• Meet income eligibility
• Agree to personally occupy the dwelling as their primary residence
• Be a U.S. citizen, U.S. non-citizen national or qualified alien
• Have the legal capacity to incur the loan obligation
• Have a credit score of 640 or higher, though lower scores may still qualify with additional requirements
• Have not been suspended or debarred from participation in federal programs
• Have a debt-to-income (DTI) ratio below 41%, though exceptions may be made
• Demonstrate the willingness to meet credit obligations in a timely manner
• Purchase a property that meets all program criteria

If you live (or are looking for a home) in a metropolitan area, a USDA loan is not for you. There are some suburbs that have USDA loan opportunities, but most of these loans are for homes in rural areas. This doesn’t mean you have to live on a farm or be a farmer. It does mean that you have to meet specific income and location requirements.

If you’re interested in applying for a USDA-backed home loan, reach out to one of our Home Loan Specialists.

Source: *https://www.usdaloans.com/program/