What are the minimum requirements for a USDA loan?

Asked 2020-07-07 06:40:50

Ali Abbasi

Ali Abbasi

Real estate

8 Answers

Your Answer


Location of home. The home must be located within one of the USDA’s designated rural areas to be eligible for a USDA loan.

Down payment. No down payment is required for eligible USDA properties and buyers.

Mortgage insurance. USDA loans do not require mortgage insurance.

Guarantee fee. An upfront fee of 1% is charged for a USDA loan, along with an annual fee of 0.35% of the loan amount. These fees are similar to mortgage insurance charged on an FHA loan, with the upfront fee typically financed, and the annual fee rolled into the monthly mortgage payment.

Credit score. USDA mortgage loans require a minimum credit score of 640 for automatic approval — provided employment and income requirements are also met. However, homebuyers with lower credit scores may still be approved if a temporary hardship (such as an illness or job loss) impacted their scores, or the new housing payment is less than what the borrower is currently paying.

Income. Two years of job and income history is the norm for USDA loans. All household member’s income must be considered, regardless of whether or not they apply for the loan. USDA loans have income limits, which vary by city, county and family size. Find out the income limit for your area using USDA’s map tool.

DTI ratio. The maximum front-end ratio for USDA loans is 29%, while 41% is the maximum back-end ratio. Borrowers who have higher DTI ratios may still qualify with a credit score of 680 or higher, and large cash reserves and a stable income history.

Occupancy. USDA loans can be used for primary residences only.

Answerd 2020-07-07 06:41:30

Ali Abbasi

Ali Abbasi

Real estate

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