A mortgage option provided by the U.S. Department of Agriculture (USDA) for properties located in rural areas.
Loan Details:
Loan Programs: The USDA operates direct single-family housing loan programs under sections 502 and 504 of the Housing Act of 1949. These programs include both loan and grant origination and servicing.
Loan Amount: The maximum loan amount is determined based on the applicant's repayment ability and the area loan limit for the county in which the property is located.
Allowable Costs: Costs such as the appraisal fee, tax service fee, homeownership education fee, and initial contribution to the escrow account can be financed even if they cause the total loan amount to exceed the area loan limit or the property's market value.
Eligibility Requirements:
Income: The income of all household members 18 years of age and older cannot exceed USDA guidelines.
Eligible Borrowers: U.S. citizens and permanent resident aliens who are unable to secure credit on reasonable terms without a USDA guarantee are eligible.
Credit Requirements: All borrowers on the loan must have a FICO score and must meet the FICO requirement. The minimum FICO score is 640.
Employment History: A 2-year work history with pay stubs or earnings statements for the most recent 30 days and W-2 forms from the previous 2 years is required. For self-employed individuals, at least 2 years of self-employment or at least 1 year in the same line of work from previous employment is required.
Underwriting: The loan must receive an Approve/Eligible from the Guaranteed Underwriting System (GUS).
Multiple Properties Owned: Borrowers can only own one other home that is not within the local commuting area or is uninhabitable.
Property Requirements:
Eligible Properties: The property must be owner-occupied and single-family. 2-4 family properties are not eligible.
Well & Septic: Private wells must be tested, and septic systems are not eligible in flood zones. Septic inspections are required only if mandated by the appraiser.
Additional Information:
Closing Costs and Prepaids: These can be financed in the loan amount if there is room in the appraised value over the purchase price.
