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USDA Rural Development Loan Program*

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USDA Rural ProgramUSDA stands for the United States Department of Agriculture. The USDA Rural Development or RD loan program is one of the best fixed rate zero down payment loans which exists for first time home buyers. The underwriting guidelines are more flexible but they may change in the coming year so take advangtage of this program now before it's too late. Also, there are no loan limits but income limitations do apply based on the county you are going to purchase the home in and your family size. Finally, USDA program offers similar interest rates and lower annual mortgage insurance fee vs FHA loan so you are able to put zero down and obtain a lower payment than FHA loan with a 3.5% down payment. Try USDA mortgage calculator. Let's discuss some of the qualifications for this loan:

The USDA home loan requires a minimum credit score of 640 and you may qualify for the program with a limited credit history. For example, 2 credit accounts with a 12 month history and 2 non-traditional accounts such as rent and electric with 12 month history may be enough credit history to qualfiy for this program.

There are income restrictions and USDA will consider the income of a spouse, a girlfriend or boyfriend, and family members who earn income in the household toward the maximum income limit even if any of these individuals are not on the loan. You can check income eligibility for your county at website. Finally, your USDA loan payment should not exceed 29% of your gross monthly income. Try our USDA loan payment calculator and calculate payments on this program.
The loan requires zero down payment but there are closing costs which can be paid by the seller or financed into the loan amount if the home appraises higher than the purchase price. Also, cash reserves are not required in most situations.
All installment debts with 10 months or less does not count against you in the debt ratio. The maximum debt allowed is 45% of your gross monthly income which includes mortgage plus auto, personal, and student loan payments as well as minimum credit card payments. Check debt ratio. Furthermore, if your debt ratio is too high then you should pay off the debt you need to qualify PRIOR to buying a home and allow 30 days for the credit bureaus to report these items as being paid off.
The home must be located in one of the eligible USDA zones and you can check USDA property eligilibity on official map. You simply put in the exact address of the home with zip code that you are interested in and you will get a response that the home is "eligible" or "not eligible". The USDA eligibility map will show you what zones are eligible in your targeted area for your home search. Next, eligible properties should be in move-in condition or repairs on these homes will need to be completed prior to closing. Also, homes in rural areas may require well and septic inspections. Finally, acreage should be typical for the area and no working farms or income producing properties may be considered for USDA Rural Development program.

A first time home buyer who wants to utilize the USDA 100% financing Rural Development program and learn about eligibility should seek USDA approved lenders and a loan officer who has experience with these type of home loans because the USDA loan underwriting guidelines and requirements are different than any other program. A USDA guaranteed loan takes longer to process than a conventional loan and you need to apply for the program as early in the home buying process as possible. Typically, it takes about 21-30 days to get approved but then your file must go to the local RD office for their stamp of approval which could add 24 hours to 30 days to the loan processing time in some states. You should allow about 45 to 60 days to close on a USDA deal.

If you want to take advantage of this great zero down payment program then you need to apply and get pre-approved for USDA home loan program now by filling out the pre-approval application. One small mis-step in the processing of your loan can make the difference between your loan getting approved or denied. Believe me, you don't want to provide tons of paperwork and information to get denied and lose out on your dream to own a home.

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*We are not a government agency or endorsed by USDA.

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