Before we get into the 2017 USDA Loan Requirements, it is a good thing to have a little refresher course on the USDA Loan, what it is, and what are some eligibility guidelines. USDA Loans are mortgages that are insured by the USDA or United States Department of Agriculture. These loans are similar in the fact that they are government insured just like FHA Loans and VA Loans. USDA Loans are also known as a Section 502 Loan which is derived from the location of the USDA Rural Development Guaranteed Housing Loan Program in the USDA Charter. Unlike most other loan programs available out there, you will not see USDA in the big cities and metropolitan areas as this loan is strictly in place in rural areas of this country and there are exceptions which could see USDA Loans in suburban areas dependent on the demographics of the area.
When getting into the 2017 USDA Loan Requirements, it is good to know the eligibility of the USDA Loan program before we jump into the various guidelines that this program has. The basis of USDA Loans and qualifications is the household size, location of the home, income, and credit scores. USDA Loans have two different income requires, 1 is for a 1-4 member household and the other is for a 5-8 person household. For a 1-4 member household the annual household income may not exceed $75,650 and can be as high as $153,400 for pre-determined high-cost areas. For a 5-8 member household the annual household income is $99,850 and up to $202,500 for high-cost areas. Besides income, the property you are looking to obtain must be deemed eligible for a USDA Loan and you can see if your property qualifies by going to the USDA website and inputting your proposed address into the search bar.
USDA Loans are loans that have guidelines that mirror that of FHA Loans as well as VA Loans. We will go over these guidelines below:
– Income Requirements: 2017 USDA Loan Requirements say that potential borrowers can have an income of up to 115% of the median income of the USDA area they are looking to purchase within. Since these loans aren’t geared to households with plentiful income, this is why there is a 115% cap for USDA Loans.
– Credit Requirements: If you are looking for a USDA Loan, most lenders are going to require at least a 620 FICO in order to consider you for a USDA Loan even though the guidelines say that a 580 FICO is the minimum score. If you are running into a lender that is imposing a 620+ FICO then you are experiencing lender overlays which are additional requirements lenders have to minimize risk.
– Debt to Income Ratio: Unlike other government programs like FHA Loans which have up to a 56.9% debt to income ratio, the USDA DTI ratios are 29% frontend ratio and only a 41% backend ratio. What this means is that these loans require sufficient excess income on a monthly basis.
– MIP: Just like an FHA Loan, USDA Loans have Mortgage Insurance Premiums that are paid on a monthly basis via your mortgage payment. The annual percentage rate for this premium is 0.35% of the loan over the course of 12 months. Even with FHA reducing their MIP requirements to 0.60%, USDA Loans are still significantly less.
If you are in a USDA Rural Area, then a USDA Loan is a great option for you and your family. As with all government insured loans, the rates on USDA Loans are very competitive and just as low, if not lower than their FHA and VA counterparts. If you’d like to work with an experienced lender in dealing with USDA Loans, then you need to reach out today at 888-900-1020 or email at firstname.lastname@example.org. We are available all day, every day, nights, weekends, and holidays in order to serve you better. We at Loan Consultants look forward to working with you!