• zero down payment
• competitive interest rates
• lower-than-average monthly mortgage insurance
• relaxed credit requirements versus conventional loans
• no loan limits
• Employment. Applicants must have proof of two years of stable income and employment.• Credit. Applicants must have a minimum credit score of 581 to qualify for USDA’s guaranteed underwriting credit requirements. However, most lenders will want a 620 or preferably to get an Automated Approval 640 is the magic number in most cases. With regards to bankruptcy, 3 years is usually the date needed to lapse since your discharge.
Job History – Similar to all other mortgage loans, a two year employment history is required. You must show that you have been consistently employed for the past two years in order to qualify for USDA financing; however in certain circumstances a small gap in employment may be permitted with a reasonable explanation. Our Loan Specialists can discuss your specific situation to see if your income is eligible. Additionally, if you have just completed schooling or military service and are newly employed but do not yet have a 2 year history, your income may also be eligible.
Income Limits – The USDA program is intended to assist low and moderate-income households, therefore to be eligible for a USDA loan, your household income may not exceed the moderate-income limits established for the specific county in which you are financing a home. Our Loan Specialists can help you determine your eligibility, or may view the eligibility requirements on this page of the USDA website:
DTI Ratio– One of the main criteria in determining if you will be approved or not is your debt-to-income ratio. While you must not make too much money, you also must not have too much debt. Your debt-to-income ratio is how much monthly debt you have (only those debts which show on your credit report are counted) compared to your qualifying income. So if your household income is $4,000/month, and your currently monthly debts (excluding rent), combined with your new mortgage payment are $1,500/month, this would equal a 37.5% DTI ratios (this was calculated by taking $1,500 and dividing it by $4,000). Generally your DTI ratio must be 41% or lower; however in certain cases, a DTI of up to 44% may be acceptable. Our Loan Specialists can help determine your qualifying ratio and discuss these options with you.
Credit Score – The minimum credit score varies from lender to lender, but most want to see at least a 620 credit score for you to be approved.
Mortgage Insurance – USDA loans have their own version of mortgage insurance. It is called the “Guaranteed Fee” and works similarly to FHA loans which have an upfront and monthly mortgage insurance premium (MIP). With USDA loans, there is a 1.00% upfront guarantee fee which may be financed on top of your loan, and a 0.35% annual guarantee fee that is divided into 12 payments each year. The amount of your annual fee (paid monthly) adjusts each year and goes down as your loan balance does. Use our USDA calculator to get an idea of what your monthly payment will be:
RETAINING A DWELLING: