The USDA Rural Housing program is designed to “improve the economy and quality of life in rural America.” It offers low interest rates with no required down payment, and you may be surprised to find just how accessible it is. The USDA guarantees a mortgage issued by Pivot Lending Group — similar to FHA- and VA-backed loans — allowing you to get low mortgage interest rates, even without a down payment. Similar to a FHA loan, an upfront premium and monthly mortgage insurance is required.
Who is eligible?
The main focus of the USDA in issuing these types of mortgages is to assist rural Americans in obtaining and maintaining home ownership. As such, this loan is not for use in urban areas or large extravagant homes.
Income limits to qualify for a home loan guarantee vary by location and depend on household size. Property eligibility and income eligibility should be reviewed by you or your mortgage loan originator, prior to moving forward with an offer to purchase a home.
USDA guaranteed home loans can fund only owner-occupied primary residences. Other eligibility requirements include:
- U.S. citizenship (or permanent residency).
- A monthly payment — including principal, interest, insurance and taxes — that’s 29% or less of your monthly income. Other monthly debt payments you make cannot exceed 41% of your income. However, the USDA will consider higher debt ratios if you have a credit score above 660.
- Dependable income, typically for a minimum of 24 months
- An acceptable credit history, with no accounts converted to collections within the last 12 months, among other criteria. If you can prove that your credit was affected by circumstances that were temporary or outside of your control, including a medical emergency, you may still qualify.