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USDA Loans

How Does the USDA Loan Program Work?

The Benefits of USDA Home Loan.

Eligibility For The USDA Loan Program

Property Location

The eligibility requirements for the USDA Loan are more lenient than other loan programs, however there are more requirements in total. For the USDA Loan Program, the home being purchased must reside in a rural area dictated by the Rural Development Rural Map. You can check property eligibility HERE. Keep in mind that these rural areas do change based on population increases and decreases, so certain rural areas may experience expansion or shrinkage.

Credit Eligibility

USDA Loan program is a bit more lenient than other programs, however, most lenders have set a requirement for credit scores to be around 640. While borrowers with lower credit scores can apply, this will usually mean that other benefits of the program, like no-money-down, will no longer be available to that borrower. Because of this, we highly recommend a credit score of at least 640 to insure that the process for the USDA Loan program continues without any denials or additional conditions based on credit.

USDA Loan Limits

In regards to total loan limits, the USDA Loan Program does not set any limits on what the borrower can receive. However, the USDA Loan program will calculate a maximum amount based on the current borrower’s income and asset situation. So, while this means that a borrower can essentially purchase any home despite the cost, provided it’s in a rural area and the borrower is eligible income-wise, the USDA will also safeguard the borrower by not allowing them to buy a home they cannot actually afford the mortgage payments for.

Property Eligibility

The USDA does set restrictions on the type of home available for purchase. These homes cannot be seen as income-producing, and they must be considered safe and sanitary. An example of an income-producing home would be a home that has a full bathroom bedroom and kitchen area in the basement with a separate entrance. This would indicate that this part of the home could be used to rent out, producing income and making the property ineligible. Additionally, any major repairs reported by the home appraiser will need to be taken care of. The party responsible for those repairs is usually the seller, but it may be the buyer if the purchase contract specifically states all repairs will be addressed by the buyer.

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