Am I eligible for…
A steak? Yes! A loan… perhaps.
Most people associate USDA with food. You may recognize these 4 letters from the labeling on the meat and veggies you purchase for your family. This is one facet of the USDA. It also pertains to housing. If you qualify, you can purchase a home with little to no money down!
USDA loans are offered by the USDA, and they allow you to purchase, refinance, renovate, repair or even relocate a home. The program hasn’t been around forever, though. It began in 1991 in an effort to boost home ownership in rural areas.
Unlike conventional mortgages, there’s no down payment required – the loan can even cover closing costs, if the seller doesn’t.
The most common reason that people do not pursue home ownership is coming up with a sizable down payment. USDA provides an alternative for potential home buyers. You do have to fit the bill to be approved for a loan.
Are you eligible?
To be eligible for this loan, you must live in a small town—often rural, but not necessarily. You can see on the map that most of Indiana is eligible for USDA financing .
Even though this loan originally meant to boost rural populations, you cannot buy a farm with the USDA’s funds. Nor can you use the loan to buy a second home… primary residences only. You will need enough income to pay the mortgage—but not so much income that you’d do fine with another loan.
- Small towns only: You need to apply to find out, but typically towns with a population of less than 20,000 are eligible. Eligible areas are subject to change.
- Debt to income: Lenders will take a look at your debt-to-income ratio, too. Your PITI (mortgage principal, interest, taxes and insurance) must be less than a certain percentage of your monthly income. All additional monthly debt can be no more than 42% of your income, dependent on other factors.
- Credit score: A score of 640 or higher is desired, though exceptions are made in some instances.
- Overall income: There are maximum income requirements that vary by state and county, and by family size. Typically, adjustments are made for disabilities, dependents and so forth. You must also be 18 or older, and be a US citizen, national or qualified alien.Your best bet is to consult with a knowledgeable lender about the the specific requirements of this mortgage product.
When you do select a home, the USDA requires that it be “modest in size, design, and cost.” Those are vague requirements. The judgment of modesty is relative to your area. It shouldn’t come as a surprise: as a loan program that helps a broad spectrum of homeowners, the USDA would not want to subsidize excess. They’d rather use those funds to help more families, as the should!
USDA is a great option for mortgage financing. Feel free to contact us if you have any questions or if you would like to explore this option further.