USDA Programs

Your Guide to the USDA Home Loan

Many people find that maintaining a good credit history and a steady income is not sufficient to qualify for a home loan at a commercial loan lending institution such as a bank, a savings and loan company, or a mortgage company. USDA home loans act as a great helping hand to finance your new home, but there are a few facts you should understand in order to increase your chances of securing a home loan. These guidelines describe the application criteria for USDA home loans.

Most rural individuals and families can become homeowners with the help of USDA guaranteed home loans. As the federal government has agreed to insure these loans, lending organizations can also help borrowers as there is less risk involved. Through the USDA’s Guaranteed Rural Housing Program, moderate- and low-income people can easily qualify for these mortgage loans, even if they cannot afford to make a down payment.

About Guaranteed Rural Housing financing

In order to qualify for a Guaranteed Rural Housing loan, you should first have a dependable and adequate income. You must also be a citizen of United States, a qualified alien, or legally admitted into the U.S. as a permanent resident. In addition, you should also have a stable annual household income which does not exceed the moderate-income limits that have been established for your specific area. The income of a family means the combined gross income of the applicant, the co-applicant, and any other adult living in the household. The applicant may also make specific adjustments to their gross income, such as $480 for every minor child in annual child care expenses, in order to qualify for a Guaranteed Rural Housing loan. You must also have a credit history which indicates a reasonable ability to pay obligations as they come due.

The USDA Rural Development area offices can provide you with the required information regarding the moderate-income limits for specific areas which come under their jurisdiction. They can also guide you in calculating your household income, and they can provide information about the terms and conditions of the financial help.

Before offering you the Rural Housing loan, the agency will examine your repayment capabilities according to predetermined ratios. These include loan interest and principal, taxes, and insurance which are divided by your gross monthly income. This should be equal to or less than 29 percent. Your total debt divided by your gross monthly income must also be equal to or less than 41 percent. There are several other factors that determine your eligibility, which will be discussed in the next chapter.