If you prefer the peacefulness and relaxed atmosphere of a rural area as opposed to the constant noise and action of the big city, the United States Department of Agriculture can help fund the purchase of your next home.
While the USDA is not a mortgage lender, they insure home loans to make homeownership more attainable for individuals or families. USDA loans are an excellent option for people who want to live in rural or suburban areas, but they do have strict eligibility requirements.
Keep reading as we explore various USDA eligibility prerequisites to secure a USDA home loan. We’ll highlight the property eligibility requirements, including how to operate the USDA eligibility map as well as essential credit and income requirements.
USDA Home Loan Overview
The USDA home loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, is intended for lower-income families to make homeownership more accessible to people in specified rural areas and suburban communities. The USDA offers three different types of home loan options— USDA direct loans, USDA home improvement loans and USDA guarantees.
When searching for a primary residence, the USDA direct loan would be your option. The USDA loan benefits include:
- Zero down payment (Too many assets may hinder your ability to receive the no down payment benefit)
- A low, fixed interest rate
- Flexible loan terms
What Is “Property Eligibility” And Requirements?
As mentioned above, USDA mortgage options are only available to lower-income borrowers that are located within the qualifying areas. The USDA refers to the property eligibility requirement as a piece of land that falls within their designated rural area. The USDA’s interpretation of a “rural area” is much broader than understanding of the general population.
They consider a rural area to be a property that is located outside of a major metropolitan area with less than 10,000 people. Additionally, an area with less than 35,000 people and a shortage of mortgage credit for low-to-moderate-income borrowers is reasonable.
Research conducted by the Housing Assistance Council found that 97% of the United States’ land falls within USDA-eligible boundaries. Arizona has a significant rural area designation with 340,104 individuals living within limits set by the USDA.
Eligibility requirements may vary slightly depending on where the property is located. However, for a property to be eligible for a USDA mortgage, the home must meet the following criteria.
- The property is only to be used as the borrower’s primary residence
- The property typically can’t exceed more than 2,000 square feet
- The home must be in working condition, including electric and plumbing
- Safe roofing is required
- The property cannot include an in-ground pool
What Is The USDA Eligibility Map And How To Navigate It
The USDA property eligibility map is an interactive tool located on the USDA website. It shows you the areas in the United States that are deemed eligible. This tool is helpful so you can check the property before you get too far in the homebuying process. The eligibility map is generally updated annually and is based on the area’s population.
To operate the map, you must open the USDA loan interactive map. Once you select the type of home, an interactive map of the United States will appear. You can then search for areas by entering the address in the search bar near the top left of the screen.
A pin will appear on your screen to mark the location you entered. You’ll receive an immediate answer whether the property is in an eligible location.
Ineligible areas will be noted in red and eligible areas will appear in green. Additionally, depending on where you’re searching, you may be able to find eligible areas nearby. If the property appears to be on the eligibility line, you should contact your local USDA Rural Development office for more information.
Additional Credit And Income Requirements
Property eligibility requirements are only one of the multiple prerequisites needed to obtain a USDA mortgage. Lenders will require borrowers to meet credit, income and debt-to-income (DTI) ratio thresholds.
So, what are the USDA loan credit requirements? Oddly enough, a specific credit score minimum is not required to qualify for a USDA home loan. However, the majority of lenders that offer this type of loan require a score of no less than 640. Additionally, 640 is the minimum score needed to qualify for automatic approval through the USDA’s automated loan underwriting system.
Since USDA home loans are intended for lower-income families, your monthly payment, including principal, interest and taxes, must be 29% or less than your monthly income.
Furthermore, USDA mortgage lenders may have a stipulation for DTI requirements. DTI is your gross monthly income compared to your monthly debt payments. DTI eligibility requirements may vary depending on the lender, but most lenders will ask that your DTI does not exceed 41%.
For more information regarding additional income or eligibility requirements, visit the USDA eligibility website or connect with one of our lending specialists.
Consider Arizona Central Credit Union As Your USDA Mortgage Lender
USDA home loans are ideal for lower-income families who want to become homeowners. The property eligibility map is a fast and easy way to see if your home qualifies for a USDA mortgage.
If you’re a lower-income borrower and want to turn your dream of owning a house into a reality, visit our USDA Mortgages page for more information and to get the application process started. If you would like to speak to a mortgage specialist about eligibility requirements, contact us today.
