USDA

 

The Premier 100% Financing Program

 

Qualification Requirements

  • Your income must be below 80% of the median income for the area in order to get a loan. Below 80% of the median income is considered “low income”, and below 50% of the median income is considered “very low income”. You must fall into one of these categories to get a USDA rural home loan.
  • Families applying for the loan must not currently have housing that is adequate. This is based on family size. If a family of 5 is living in a two bedroom apartment then that is not adequate and they would be eligible for the loan.
  • The home being purchased or constructed must be a reasonable size for the size of the family. Oversized homes do not qualify for these loans.
  • Those people who apply for the loan must have a decent credit history. The USDA has certain credit requirements for their borrowers. The program is meant to help people who could not get a loan elsewhere because of income or down payment requirements which are lower with the USDA loan program because they offer subsidies, zero down payment, and low interest rates. This program was designed to help low income families who could not get a home loan anywhere else.
  • The borrower must be able to afford the mortgage payments.

Credit Eligibility

When you are ready to make a home purchase using a USDA home loan guarantee program, you must find an approved lender who is familiar with the USDA home loan underwriting guidelines. When you set up an application, your credit history will be ordered by the lender.

Your credit history shows your past debt obligations to other creditors and whether you paid on time or late, or if you managed your credit within limits or extended your limitations. Any derogatory late payments, such as 30 days or more, will show on this credit history. Also, any bankruptcy, repossession, or foreclosure will also be revealed on the credit report.

If you know you have made all past credit payments on time and have a good credit history, you are in good standing, and your home loan underwriter will enjoy looking at a clean report. But even if you have some “spotty” or derogatory credit issues listed above, you still may be eligible for a loan. The good news with a USDA mortgage guarantee home loan is that there is no minimum credit score.

A mortgage loan underwriter wants to know that you are willing to repay the loan. If you credit history shows late payments or even previous bankruptcy, you can still repair your credit report with a good deal of effort.

Late payments must usually be at least a year in the past, and your current history must show that you have met your credit obligations on time and diligently for at least 12 months. If you have filed for previous bankruptcy, the declaration usually must be at least two years old. Since the bankruptcy, you must show that you have been diligent with credit and debt payments.

Income Eligibility

The USDA home loan guarantee program is designed to help low to moderate income families. There are income restrictions depending on the area you wish to purchase a home. Your loan underwriter will look at your gross income, income from any co-applicants, as well as any other adults who plan to live in the household. If your income exceeds the maximum mark, you may still make certain adjustments to your gross income that will help you qualify.

Are you steadily employed with the same employer for many years? Having a steady job and income helps with the underwriting process. But what if you have worked many jobs over the last few years? Or you are self employed?

In order to give a loan underwriter a clear picture of your income, you will need to submit copies of at least two years of IRS tax filings. If you are self-employed, three years of tax returns may be necessary to determine a good average income. If you currently work for an employer, you should provide copies of the last two months of pay stubs.

Your dream of owning a home can become a reality. Your diligent work at correcting credit issues and stead income verification will be a big help in obtaining a rural home loan guaranteed by the USDA.