The USDA rural development loan is gaining popularity as many Texas Homebuyers are seeing an increase in home values and can find homes in the rural outskirts of major cities. It allows homebuyers to purchase a home with 100% financing, meaning no down payment.

The USDA Loan used most is the Section 502 Guaranteed loan which is for borrowers that need 100% financing, no money down, and earn a moderate income. This is the type of mortgage loan used or can be approved by a lender or broker. The second loan type is a Direct Loan Program with USDA. This offers the 100% financing with no money down but is for low and very loan income applicants through subsidies and must be applied for directly with USDA.

This program is not limited to first-time homebuyers only. There are restrictions for those that can apply. Based on the lender program with moderate income limits, an applicant cannot exceed 115% of the medial household income in the area where the home is located.

white house under maple trees
Photo by Arno Smit

This information can be found at https://eligibility.sc.egov.usda.gov/eligibility/incomeEligibilityAction.do;jsessionid=dHBVLgwmji6OUSLizwM28BX7 and based on state and county.

The applicant must occupy the home as a primary residence. The applicant must be a US Citizen, US non-citizen national, or qualified alien. The applicant must be unable to get conventional financing with no private mortgage insurance. This means you must prove you have less than 20% down payment in your accounts. Applicants mut not be suspended from participation in federal programs.

Let’s discuss what properties qualify for USDA loans. The property must be in a rural area. Typically, cities that lie outside of city limits or with a population of less than 30,000 people. The following site is a tool you can use to find property eligibility, https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfpd.

You can search specific address on this USDA site. The property must be a single-family home. This includes condominiums, modular and manufactured home with a fixed foundation attached or detached home. The home must be pretty much move-in ready and meet HUD standards. There are no set acreage limits for a USDA loan. Acreage just needs to be considered ‘common’ for the area of the home.

There is no maximum purchase price requirement. Loans are based on applicant’s ability to pay as with other mortgage loans. The applicant must qualify for the loan using income verification/documentation. There must be a 1-year history of employment for W-2 employees.

If the applicant is self-employed, there must be a 2-year history of income. Credit is still pulled to demonstrate ability to repay debts and to calculate debt to income ratios. A lender can assess alternative credit for an applicant that has no traditional credit.

This can be documentation for utility bills, rental history, etc. to create a non-traditional payment history. The monthly debt payments including the new mortgage payment cannot exceed 41% of verified gross monthly income. The monthly housing payment can not exceed 29% of the verified gross monthly income. This is what is considered the debt-to-income ratio.

Please reach out to me for more information by visiting my website lisabarrientes.com or calling me at 512-740-2048 for more information.

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