Who Qualifies for a USDA Loan?

USDA loans are one of the least-known mortgage products available. Learn more about what qualifying for a USDA loan entails.

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General Qualifications

In order to qualify for a USDA loan, you must meet the following qualifications: You must be a U.S. citizen or permanent resident alien. You must be employed or have proof of steady income. You must be able to show that you have a good credit history. You must have a valid Social Security number.

Borrower must be a U.S. Citizen or permanent resident alien

In order to qualify for a USDA loan, borrowers must satisfy the following general qualifications:

-Be a U.S. Citizen or permanent resident alien
-Have satisfactory credit history
-Have a stable employment history
-Demonstrate the ability to repay the loan
-Meet applicable Veteran status requirements (if applicable)
-Not be suspended or debarred from participation in federal programs

Borrower’s income cannot exceed 115% of the median income for the area

In order to qualify for a USDA loan, the borrower’s income cannot exceed 115% of the median income for the area. Furthermore, USDA loan guidelines state that the borrower must have a “reasonable” credit history, meaning that they have made all of their previous payments on time and have not defaulted on any loans.

Borrower must have a credit score of 640 or higher

In order to qualify for a USDA loan, borrowers must have a credit score of 640 or higher. This is higher than the minimum credit score required for conventional loans, which is 620. Additionally, borrowers must have a debt-to-income ratio of no more than 41%. This means that your total monthly debt payments (including your mortgage payment) should be no more than 41% of your gross monthly income.

Property Qualifications

Anybody looking to purchase a home in a rural area with a USDA loan must first qualify for the program. But it’s not just any home in any rural area. The USDA has strict property qualifications that must be met in order for a home to be eligible for financing. Interestingly, these property qualifications go beyond just the physical characteristics of the home. The USDA also takes the location of the home into consideration as well.

Property must be located in a USDA-eligible area

To be eligible for a USDA loan, you must purchase a home in a USDA-eligible area. Most areas in the continental United States are eligible, with a few exceptions. You can use this map to see if the location of your desired home meets eligibility guidelines.

In order to be eligible for USDA financing, your home must be located in a designated rural area. These designated rural areas can be found here. It is important to note that the USDA’s definition of “rural” is broad, and includes many areas that are not traditionally considered rural, such as small towns and even some larger suburbs.

Property must be a single-family home, townhome, or approved condo

In order to be eligible for a USDA loan, your home must be a single-family residence, meaning a property with only one unit. You can live in that unit as your primary residence, but the USDA does not allow you to rent out or use the home as income property. If you’re looking for an investment property or a second home, you will not be able to use a USDA loan.

USDA-eligible properties include:
-Single-family homes
-Townhomes
-Condominiums (must meet certain guidelines)

Property must be your primary residence

To qualify for a USDA loan, the property must be your primary residence. This means you can’t buy a second home or investment property with a USDA loan. If you qualify for a USDA loan, you’ll also need to meet specific qualifications regarding the condition and size of the home.

The home must:
-Be located in an eligible rural area
-Be less than 2,000 square feet
-Be single family (no duplexes, triplexes or quadplexes)
-Have a moderate income level

If you think you might qualify for a USDA loan, it’s important to get pre-qualified with a lender so you know what size loan you can afford.

Income Qualifications

To qualify for a USDA loan, your household income must meet certain guidelines.

Borrower’s income cannot exceed 115% of the median income for the area

In order to qualify for a USDA loan, borrowers must satisfy the following requirements:
-Borrower’s income cannot exceed 115% of the median income for the area
-The property must be located in an eligible rural area as defined by the USDA
-The borrower must have a satisfactory credit history
-The borrower must have sufficient assets to make a down payment
-The borrower must have a valid Social Security number

Income limits vary by household size and county

USDA Income Limits 2019 – 2020. Households of more than 8 members can add 8% for each additional member to the 1-4 household member limits listed above. NOTE: All counties not mentioned in the table below are considered “non-metro” and have the following income limits:

1-4 Household Members: $86,850
5+ Household Members: $114,650

Additional Qualifications

To qualify for a USDA loan, you must meet the following qualifications: You must be a U.S. Citizen or legal permanent resident. You must be employed or have a verifiable source of income. You must have a satisfactory credit history. You must have a down payment. You must be able to show that you can afford the mortgage payments.

Borrower must have a credit score of 640 or higher

To be eligible for a USDA loan, borrowers must meet the basic eligibility requirements set forth by the USDA, which cover credit, income, property usage and location. In addition, borrowers must have a credit score of 640 or higher to qualify for automatic approval.

Borrowers with lower credit scores can still qualify for a USDA loan if they are able to provide compensating factors to the lender. Compensating factors might include a low debt-to-income ratio, a high level of reserves, or strong employment history.

To learn more about credit score requirements and how to qualify for a USDA loan, contact a participating lender in your area.

Borrower must have sufficient income to repay the loan

If your income isn’t high enough to repay the loan, you won’t qualify for a USDA loan. The amount of money you need to make each year to qualify will depend on the size of your household and the amount of your debts. To give you an idea of what’s required, the USDA says that a family of four with no other debts should have an annual income of at least $78,200 to qualify for one of its loans.

Borrower must have a history of reliable credit

To qualify for a USDA loan, borrowers must have a history of reliable credit. This means borrowers must have a credit score of 640 or higher. A cosigner may help borrowers who do not have a strong credit history to qualify for the loan.