Understanding USDA Loans

image by USDA Mortgage Source

USDA loans offer incredible terms and savings for home buyers, including 0% down payments and low interest rates. However, for those who qualify, there is a much more intensive application process. Thanks to this realtor.com article for creating this helpful checklist, which outlines all the things you must have in place to be approved.

1. Do you qualify? The basic qualifications include:
-US Citizen
-Credit Score of at least 640
-Stable income and have enough savings/cash to pay full year’s worth of mortgage
-Steady employment for 2 years
-Debt to income ratio less than 43%

2. Does your income meet USDA requirements? In 2023, the USDA income limit for households with one to four members is $103,500 in most U.S. counties.

3. Where is the location of your Rural Development Office. Our local office is in the Batesville, MS area. Find out more here.

4. Is your lender USDA approved? Make sure to ask any lenders you contact how often they underwrite USDA loans.

5. Is the home you are purchasing USDA loan eligible? Luckily, all homes in our local area are considered USDA eligible.

6. What is the area’s loan limit? The area loan limit will give you an estimate of what the USDA might consider an appropriate home choice. You can check out loan limits in MS here.

7. Does the home meet USDA standards? While the home may be in the right location and eligible, each individual home must also pass certain tests in order for a USDA loan to be granted. Here are a few basic criteria:
-The home generally should be between 400 and 2,000 square feet.
-It must be a single-family home
-The home cannot be used for income-producing purposes.

8. Do you have all the needed paperwork to apply? Make sure you have copies of these documents ready:
-Tax returns from last 2 years
-W-2’s from last 2 years
-30 days of pay stubs
-1099s, if self employed
-driver’s license or other governmental id
-Bank statements from previous 2 months