USDA Loans

Borrower Eligibility Requirements

• Credit Score: Minimum 640 for automated underwriting (manual underwriting available below 640)
• Citizenship: Must be U.S. citizen, U.S. non-citizen national, or qualified alien
• Primary Residence: Must be your primary residence (no investment properties or second homes)
• Income: Stable, dependable income that will continue for at least 3 years
• Debt-to-Income: Typically 29% housing / 41% total (some flexibility with compensating factors)
• Payment History: Demonstrated ability to pay debts on time
• No Housing Assistance: Cannot receive other housing assistance simultaneously

Property Standards

• Must be a single-family residence (1 unit only)
• Must be modest in size and design for the area
• Maximum square footage: 2,000 sq ft (above-grade living area)
• Must have a permanent foundation
• Cannot have in-ground swimming pool (above-ground OK)
• Income-producing activities limited (small hobby farm OK)
• Property must meet USDA's property standards and local codes

Credit and Financial Requirements

• Credit Score: 640+ for streamlined processing
• Below 640: Manual underwriting available (strong compensating factors needed)
• Bankruptcy: 3 years from discharge (Chapter 7), 1 year into plan (Chapter 13)
• Foreclosure: 3 years since completion
• Collections/Judgments: May need to be paid off or have payment plan
• Employment: 2 years stable employment (same field acceptable)

Documentation Required

• Last 2 years W-2s and tax returns
• Last 30 days pay stubs
• 2 months bank statements (all pages)
• Proof of any other income sources
• Identification (driver's license, Social Security card)
• Residence history for past 2 years
• Explanation letters for any credit issues

1. Property Search & Pre-Approval (1-2 weeks)

• Get pre-approved for USDA financing
• Search for homes in USDA-eligible areas
• Verify property eligibility before making offers

2. Offer Acceptance & Contract (3-7 days)

• Make offer on USDA-eligible property
• Negotiate and sign purchase contract
• Submit earnest money deposit

3. Loan Application & Processing (2-3 weeks)

• Complete full loan application
• Submit all required documentation
• Order appraisal and title work
• Lender reviews and processes file

4. USDA Underwriting (1-2 weeks)

• File submitted to USDA underwriters
• USDA reviews income, credit, and property eligibility
• Conditional approval issued (may require additional docs)

5. Clear to Close (3-5 days)

• Satisfy all conditions
• Final USDA approval
• Schedule closing date

6. Closing (1 day)

• Sign loan documents
• Pay any closing costs (can be rolled into loan or seller-paid)
• Receive keys to your new home!

Can I finance closing costs with USDA?

Yes! The upfront guarantee fee is automatically financed. Other closing costs can be paid by the seller (up to 6% of the purchase price) or you can negotiate seller concessions to cover them.

What if I'm over the income limit by a small amount?

Income limits are firm, but there are a few considerations:

• Temporary income (bonuses, overtime not guaranteed to continue) may be excluded
• Certain childcare expenses can reduce your income calculation
• Income from household members under 18 is excluded
• If still over, consider FHA or conventional 3% down programs instead

Can I buy a fixer-upper with USDA?

Limited repairs can be financed into USDA loans, but major renovations are not allowed. The property must be move-in ready and meet USDA property standards. For fixer-uppers, consider FHA 203(k) loans instead.

Can I have a barn, workshop, or outbuildings?

Yes, as long as they're typical for the area and don't indicate income-producing activities beyond small hobby farming. Large commercial operations disqualify the property.

How much acreage can I have?

There's no strict acreage limit, but the property must be typical for the area and not income-producing. Most USDA properties are under 10 acres, though larger lots are possible in very rural areas.

Can I get a USDA loan if I already own a home?

Yes, as long as the USDA property will be your primary residence. You'll need to sell your current home or explain why you're keeping it (moving for work, renting it out, etc.).

Can I use USDA for a mobile/manufactured home?

Yes, if the manufactured home:

• Is permanently affixed to a foundation
• Built after June 15, 1976 (HUD code)
• Meets USDA property standards
• You own the land (not in a mobile home park)

What happens if the area becomes ineligible while I have my loan?

You're fine! Once you have a USDA loan, changes to area eligibility don't affect your existing loan. You can keep it for the full term.

Can I refinance my USDA loan to conventional or FHA later?

Absolutely! You can refinance to any loan type at any time. Many borrowers refinance once they have 20% equity to eliminate the guarantee fee, though USDA's fee is already quite low.

✅ USDA is Great For:

• First-time buyers with little or no down payment saved
• Borrowers who meet income limits and want to buy in rural/suburban areas
• Those who want lower fees than FHA (1% vs 1.75% upfront)
• Families wanting more space/land at lower costs than city areas
• Buyers who qualify for location but not military service (vs VA)
• Those seeking competitive rates on 100% financing

❌ USDA Won't Work If:

• You're buying in an urban area (not USDA-eligible)
• Your household income exceeds 115% of AMI
• You want an investment property or second home
• The property is too large or income-producing
• You need a jumbo loan (USDA follows conforming limits)
• You can't wait 45-60 days for closing (USDA takes longer to process)