What are USDA Loans?
USDA Rural Development Loans are insured by the U.S. Department of Agriculture. They were created by the USDA to provide mortgages to and build the rural housing market by providing an affordable financing incentive. USDA loans have desirable features including 100% financing, however they are only available in USDA-eligible areas and have income caps.
USDA Loan Requirements
- Down Payment: None required.
- Credit Score: Typically 640 or greater, but 620 with exception (Manual Underwriting).
- Debt-to-Income Ratio (DTI): Typically 45% or lower.
- Loan-to-Value Ratio (LTV): Up to 102% financing available, depending on appraisal.
- Loan Limit (max allowable loan amount): None. Determined by income and DTI.
- 30-Year Fixed-Rate mortgages only.
- USDA Mortgage Insurance (USDA MI) is required.
- Income restriction based on total household income.
- Property location eligibility required.
- Property purchased must be an owner occupied primary residence (no second home, investment, or commercial including commercial farms).
USDA Mortgage Insurance Facts
- Upfront Mortgage Insurance Premium (UFMIP) of 2% the base loan amount.
- Annual Premium of 0.50% the loan amount paid monthly along with mortgage payment.
- Monthly Mortgage Insurance remains for the life of the loan.
USDA Income Requirement
- Based on total household income.
- Generally must not exceed 115% of the median income of purchase area.
- Varies by household size, principal borrower age and more.
- Property and land must fall within specified USDA-eligible borders.
- Eligibility tool: https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
- Single family residences.