USDA eligibility for 2021
USDA eligibility is based on a combination of household size and geographic location, as well as typical mortgage approval standards such as income and credit checks.
Households of 1-4 people in most of the United States can have incomes of up to $ 91,900, and households of 5 or more can earn up to $ 121,300. In some areas with higher cost of living, the USDA income limits are even more generous.
If you are buying a home outside of a big city and you have decent creditworthiness, it is worth checking your eligibility for this zero down loan program.
Verify Eligibility for USDA Loan (June 20, 2021)
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The USDA home loan program
The USDA loan program is one of the best mortgage loans for qualified borrowers.
No down payment is required and mortgage insurance fees are typically lower than traditional or FHA loans. USDA rates also tend to be below the market.
To qualify for 100 percent financing, home buyers and refinancing homeowners must meet the standards of the U.S. Department of Agriculture that insures these loans.
Fortunately, USDA guidelines are more lenient than many other types of credit.
USDA Eligibility Requirements
Basic USDA loan requirements include:
Minimum creditworthiness – 640 at most lendersClean up the credit history – No late payments or recent bankruptcy or foreclosureIncome requirements – Income limits vary by area; often $ 91,900 for a 1-4 person householdemployment – Borrowers need a stable income and previous work history. Self-employment is eligibleGeographic requirements – You must own a home in an eligible areaReal estate requirements – Must be a single family home that you will use as your primary residenceCredit type – Only a 30 year fixed rate mortgage is allowed
Additionally, most USDA lenders want borrowers to have a debt-to-income ratio (DTI) below 41 percent.
That means your monthly debt payments (including credit cards, car loans, and your future mortgage payment) shouldn't be more than 41% of your gross monthly income.
However, this rule is not set in stone.
The USDA is flexible about its credit requirements. And lenders can sometimes approve applications that are weaker in one area (like creditworthiness or DTI) but stronger in another (like income or down payment).
The goal of the USDA is to help low and middle income buyers become homeowners. So if you meet – or are close to – the basic criteria, check your eligibility with a lender.
Verify Eligibility for USDA Loan (June 20, 2021)
USDA income limits
The USDA income limit is 115% of the median income (AMI) for your area. This means that your household income must not be more than 15% above the median income where you live.
The actual dollar amount will vary based on location and household size. For example, the USDA allows households with 5-8 members to have a higher income than households with 1-4 members.
And the USDA's income limits are higher in areas where workers typically earn more.
Here is just one example to show you how USDA income eligibility can vary by location:
Area2021 income limit for 1-4 person household2021 income limit for a 5-8 person householdAdams County, Nebraska $ 91,900 $ 121,300 Duluth, Minnesota $ 96,300 $ 127,100 Olympic Tumwater, Washington $ 103,700 $ 136,900 Napa, California $ 135,250 $ 178,550
You can check the current USDA income limits for your county here.
Eligibility for USDA real estate
Officially known as "Rural Development Loans," the USDA's mortgage program is designed to promote home ownership in underserved parts of the country.
For this reason, the US Department of Agriculture only guarantees loans in eligible "rural" areas.
But don't let that put you off. The USDA's definition of “rural” is looser than you might initially expect.
You don't have to buy a lot of land or work in agriculture to be USDA eligible. You just have to live in an area that is not densely populated.
Officially, the USDA defines a rural area as an area with fewer than 35,000 inhabitants or a "rural character" (i.e., there are some special circumstances). And that covers most of the US landmass.
So before you write off a USDA loan, check the status of your region. You can find out if a property is eligible for a USDA loan on the USDA website. Most areas outside of the big cities qualify.
USDA authorization card
Source: USDAloans.com based on Housing Assistance Council data
USDA Mortgage Insurance Requirements
The USDA single family home program is partially funded by borrowers using USDA loans.
Homeowners billed mortgage insurance premiums help the government keep the USDA's rural development program affordable.
The USDA last changed its mortgage insurance tariffs in October 2016. These tariffs still apply today.
Today's USDA mortgage insurance rates are:
1.00% upfront fee based on loan size (can be included in loan balance) 0.35% annual fee based on remaining principal
As a real-world example of how USDA mortgage insurance works, let's say a home buyer in Cary, North Carolina borrows $ 200,000 to buy a home with no money.
The buyer's mortgage insurance cost includes an upfront mortgage insurance premium of $ 2,000 and a monthly payment of $ 58.33 for mortgage insurance.
Note that USDA mortgage insurance does not have to be paid for in cash. It can be added to your loan balance to reduce your funds required upon completion.
Check your USDA eligibility
USDA-guaranteed loans can be used to buy homes and refinance existing real estate (provided they are in an eligible area).
For those who qualify, this is often one of the best loan options available.
USDA loans are great for first-time home buyers because you don't need any money saved to pay the down payment. But remember – you will still have to pay the closing costs.
It might be easier than you think to qualify for a home loan through the USDA program. Check your eligibility with a USDA approved lender today.
Confirm your new plan (June 20, 2021)