Are You Eligible for a USDA Loan?

March 13, 2023

Purchasing a home is a big investment, but it’s one that can provide some financial security in the long run. Our Columbus GA Realtors are here to help you find the right home for your budget. Even if things are tight financially, you may find that a United States Department of Agriculture (USDA) loan may provide you with the extra help you need to finally purchase a home of your own.

A USDA loan is a low-interest rate mortgage with 0% down. It’s designed to help people in rural and suburban areas who have low and moderate incomes purchase a home. However, there are a number of requirements that you need to meet to be eligible for this kind of loan. We’ll cover a few basics, but more people qualify than often realize, so it’s worth doing some more research.

There are two types of USDA loans: direct and guaranteed. If you are a very low-income applicant, the direct loan may be best for you. It is directly funded and administered by the USDA. The guaranteed loan is financed by lenders, but is guaranteed by the USDA in case the borrower is ultimately unable to repay, relieving the lender’s financial risk. This loan is for those who have a more moderate income.

Regardless of the type of loan, the home you want to purchase must be in an eligible rural or suburban area. Other requirements include income eligibility limits, a stable income, a debt-to-income ratio that is 43% or lower, and creditworthiness, generally no lower than 640. You also need to be a US citizen or qualifying noncitizen, and the property must be your primary residence. You must also currently be without decent, safe, and sanitary housing, and unable to qualify for a loan elsewhere.

Unlike traditional loans, the lower your income the better, as there are income caps for qualifying for both USDA loans. These depend on the median income of the area where you’re looking to purchase. For a direct loan, you should not make more than 50% to 80% of the median income. For a guaranteed loan, your income should not be more than 115% of the area’s median income. Anyone who will live in the home, even part time, even if not on the mortgage paperwork, will have their income included. This refers to older relatives living with you – even if retired or disabled – college-age children, and boyfriends or girlfriends. However, with every family member over four, the income limit increases by 8%.

There are other factors involved in qualification, so it is important to do your research and talk to someone who understands the various requirements and the median income for the area you’re considering. Our Columbus GA Realtors can help you with some information and direct you to other information sources to help you see if you’re eligible for a USDA loan. The extra effort is worth it to be able to purchase your own home.

Categorised in: Are You Eligible for a USDA Loan?, Be Patient, buying your first home, Community Info

This post was written by Rose Anne Erickson