USDA mortgage loans allow borrowers to buy in rural areas with no money down.
Down Payment Required: None
Minimum Credit Score: None, but it’s very hard to get approved with a score below 640
Income Limit: Varies by area
Other Restrictions: Must purchase in the USDA approved lending area. Click here to view map
Yes. USDA mortgage loans can only done when purchasing a home in an approved rural lending area. Click here to view the map.
Most mortgage lenders a minimum credit score of 640 on our USDA loans and a clean credit history.
There are no specific rules regarding Chapter 7 bankruptcy, but it’s hard to get approval if it’s been less than 2 years since the discharge date.
For a Chapter 13 bankruptcy, the repayment plan needs to have been paid for at least one year. If it’s not yet discharged, court approval will be needed.
USDA allows you to have a foreclosure on your credit report. However, it must have been at least 3 years since the date the sheriff filed the deed with the county. We will also check court records to make sure everything is cleared out.
USDA also allows a total debt ratio of up to 41%, with a housing ratio of 29%
USDA mortgage loans have no down payment!
It is possible to get approved for USDA financing with chargeoffs on your credit report. These do not need to be paid back before closing.
Any unpaid collection account needs to have a payment plan or be paid off before closing. If not, 5% of the unpaid collection balance will be used toward your debt ratio calculation. If your total unpaid collections are $2000 or less, this requirement is waived.
Medical collections are ignored in debt ratio calculations and do not need to be paid off before closing.
Student loans have special rules when you are applying for USDA financing. When you are on deferment or using income based repayment, 1% of the outstanding loan amount is used for qualifying purposes. Additionally, delinquent student loans that are charged off to the government need to be settled or refinanced.
USDA does not have specific rules on the guidelines regarding mortgage lates, but it will be very hard to get approved if you have been on your current mortgage over the past year.
When applying for a USDA mortgage, the file is submitted to USDA’s approval program called Guaranteed Underwriting System (GUS) to make a credit decision. This program takes into account the credit score, the debt ratio and savings (called reserves in the lending industry) to make a yes or no credit decision. Sometimes if the file is close, we can also use manual underwriting to evaluate the file.
USDA does not have loan limits but borrowers must meet income requirements.
Income caps do apply for USDA mortgage loans, which are based on the average income in the community.