Mortgage loans are complex, and with so many options, it can be hard to know which is the best for you. To be eligible for certain loans, you have to meet very specific criteria. USDA home loans are no different. First Fidelis wants you to know whether or not you qualify for a USDA home loan.
Types of USDA Home Loans
First, we must discuss the different types of USDA home loans. There are three main programs for mortgage loans through the USDA.
- Loan Guarantees: These are mortgage loans issued by a local lender that allows you to get low-interest In some cases, you don’t even need a down payment. However, if you only put a little or no money down, you will be required to pay mortgage insurance each month.
- Direct Loans: These loans are issued directly by the USDA for low- and very low-income applicants. Qualifying income amounts vary depending on where you live. Interest rates may be as low as 1 percent with proper subsidies.
- Home Improvement Loans and Grants: These loans and grants help homeowners make repairs and upgrades to their homes. With loans and grants combined, up to $27,500 can be given as assistance.
To be eligible for a USDA mortgage loan, you have to fall under certain criteria. Here is the full breakdown of what is required:
- S. citizenship or permanent residency
- Dependable income (proof required for a minimum of 24 months)
- Monthly payments that are 29 percent or less of your income each month. When combined with other monthly debt, payments can’t exceed 41 percent of your monthly income. Higher debt ratios may be considered if you have a credit score over 680.
- Credit score of 581 or better
- Satisfactory credit history that includes $0 in collections within the last 12 months. Other criteria will also be considered.
If your credit score is 640 or better, your application will be streamlined. Applicants with scores under 640 will need to meet stricter underwriting criteria. Applicants without a credit score or with limited credit history might be able to qualify for a USDA loan with credit references, such as rental and utility payment histories.
USDA home loans tend to go to those with the greatest need, meaning people who:
- Don’t have decent, safe, and sanitary housing
- Are unable to get a home loan from traditional sources
- Have income at or below the low-income limit in the area in which they live
USDA loans are generally reserved for those living in rural areas. Occasionally, locations in suburban areas will be eligible.
Direct loans are an option on homes of 2,000 square feet or less with a market value below the area’s loan limit. These home loans may be as high as $500,000 in places like California where real estate costs are higher, while in other parts of the country, loans may be closer to $100,000.
To receive a USDA mortgage loan, you need to reach out to a participating lender. If you are looking for a USDA home loan in Kansas or Missouri, First Fidelis can help. Our mortgage approval process is quick and easy. We generally close on home loans in under 30 days, which will help you get into your new home faster than with other lenders in the area. For help, give us a call today at 913-205-9978.