Credit and Debt

If you have a credit and debit household income that does not exceed 115% of the AMI (area median income); you can check the income limits in your area here. 

They include all members (income) if you have a spouse earning money or children, they may use that income to qualify (or disqualify you)

The home must be your primary residence, and you need to move in within a certain period.

You can be a citizen, US non-citizen national, or Qualified Alien. Must have credit or debit.

Be unable to obtain conventional financing with no PMI – meaning; you can’t have a lot of money saved up because this program is for people who have a hard time coming up with the downpayment.

Not be suspended from participating in federal programs.

Applicant Qualifications

Income Requirments

• Non-Self-employed: 1-year history of having a regular paycheck, doesn’t have to be the same job; they want to see you earn more.
• Self-employed – 2-year work history proof – tax returns

• Average what you are making in a year, then divide that by 12
• This USDA doesn’t require any reserves; there is no set credit score requirement! Instead, they come up with their determination based on your whole scenario.
• Bank overlays – some banks may require a specific credit score, but USDA doesn’t have requirements.

If your local bank denies you, ask them about credit and debit overlays. You didn’t meet that bank’s overlay. Don’t give up. If you get declined, you may feel bashful and embarrassed, but you need to know what the banks require to approve you.

They will look at all of your money, credit and debit coming in each month; then, they will compare that to the payment with the house (taxes, insurance, principal, interest); that payment should not exceed 29% gross income.

Debt to income ratio – No more than 41%.

Not only do you have to meet specific criteria for the loan, but you also have to find a particular property to meet the loan.

What Can You Buy?

The house has to be a Single Family Dwelling. It can’t be a duplex or multi-family, but it can be any of the following:

• Single-family
• Manufactured
• Modular
• Mobile home
• Condo

As long as it’s secured on the foundation and must meet the HUD 4000.1 standards – Housing Urban Development makes these standards each year.

Keep in mind that some foreclosures, short-sales, and fixer-uppers may not meet these standards and won’t qualify.

There is no maximum purchase price; if you make a large amount of money and have less debt, you can still qualify in a high-cost area.

There are no acreage limits on credit and debit, but it must be typical for the area. For example, if homes in your area are usually 10 acres, and you’re trying to buy in that area, you could qualify for this; however, if the homes in your area typically include a 1-acre lot and you wanted to “buy the premium lot with 20 acres” may be more challenging to finance; we’re not saying it’s impossible.

With that said, if you were looking to acquire a farm, that might require a different loan. So here, you can search for RD-eligible areas.

No seasoning rules – Unlike some government-backed loans like FHA loans, there are no seasoning rules, meaning: if you wanted to purchase a home that was recently flipped or renovated, this is fine.

The property must be located in a rural area, for example, have a population under 30,000, or when you drive around, it’s a primarily rural community. Suburban cities would have a better likelihood to qualify than in a metro area.

How Do You Qualify? 

Find a lender in your area who USDA approves your credit and debit to get you qualified. You don’t need to go through a lender; you can also go to USDA direct, essentially, and get the same loan terms: 100% financing and a $0 down payment. Each has its downsides and benefits, but it’s your decision.