To qualify for a USDA home loan underwriters will look at three things:
• Ability to repay the loan
• Payment history
• Location and type of home
Ability to repay the loan
When qualifying for a USDA loan you must determine how much home you can afford. How much you can afford will depend on what your current credit obligations are and your current rate of pay. Determining how much you can borrow is done by calculating your debt to income ratio. To learn more about debt to income ratios and other guidelines visit our USDA Guidelines section.
To qualify for a USDA Home Loan your previous payment history will be considered. An underwriter will need to verify that you have established a history of paying your bills in a timely manner. While your payment history does not need to be perfect, you do need to show a pattern of on time bill payment.
Traditionally, your credit report is reviewed to determine your payment history. However, if you do not have any bills that show on your credit report there are cases where ‘nontraditional’ credit accounts may be used to determine your payment history. For more information on this, and other items visit our USDA Guidelines page.
Location and Type of Home
USDA Home Loans are intended for families interested in purchasing single family, stick built homes. Investment properties, homes that are considered income producing properties, and mobile homes are not eligible for USDA financing. A USDA loan is a perfect loan for a home that is considered ‘move in ready’ and not in need of major repairs.
The other factor to determine eligibility would be the location of the home. USDA Home Loans are available to people who live in rural and suburban communities. Generally speaking, Rural Development defines a rural area as a city, or community of residence USDA has set household income limits that need to be checked to determine eligibility. To view a detailed list of each state with county limits visit our USDA Home Loan information by state page.