USDA (Rural Housing) loans

A USDA home loan is a competitively priced mortgage option that helps to make purchasing a home more affordable for low and moderate income households in designated rural areas. The U.S. Department of Agriculture backs USDA loans in the same way the Department of Veterans Affairs backs VA loans for eligible individuals such as veterans and their families.

This government backing means compared to conventional loans, mortgage lenders can offer lower interest rates in many cases. If you qualify, you can buy a home with no down payment, although you’ll still need to pay closing costs.

highlights

• Borrowers must be a US citizen, non-citizen national, or permanent resident alien.

• Properties must be located in eligible rural areas. You can check the eligibility of specific properties at the USDA website.

• USDA loans are for families who demonstrate economic need, so your adjusted gross income can’t be more than 115% of the median income in the area. You can check USDA household income limits here.

• Your debt-to-income ratio compares your total monthly debts to your gross income and is a key indicator of your ability to handle repayment. This ratio is best kept under 41% for loan approval, but is allowed to go up to 43% in some cases.

• The minimum score for USDA approval is typically 620 or 640, but depends on the lender.