What Is a USDA Loan?

What Are Home Equity Loans Used For 16

A USDA loan is provided and funded by the United States Department of Agriculture and was meant to help families in rural areas to access mortgages to provide homeownership. It is believed that helping these types of families would build stronger communities and a better quality of life for low to moderate levels of income.

These loans are backed by the USDA and as such they can offer competitive interest rates and the option of not having to need a downpayment. Homebuyers will need to meet certain eligibility requirements to access these loans. The first step is to ensure the prospective home is located in an eligible rural areas. You can check that by accessing this USDA’s site.


This map will allow you to see if the home you are interested in is eligible. The other criteria you will need to clear is income eligibility meaning you have to show you have an economic need. Your adjusted gross income cannot be for than 115% of the median income in the area. You can also determine your income eligibility at the same website as above. Your income must be stable, and you cannot have a late payment on your rent or mortgage payment for the last 12 months.

Your credit score needs to be above 620 to qualify and your debt-to-income ratio should be around 43%. Also, there is no monthly private mortgage insurance on the loan, but you pay a guarantee fee at closing which acts as the insurance.

USDA loans are not for everyone and are very specifically targeted to lower income folks looking for a home. It is always best to consult with a trusted mortgage professional such as the Home Loan Advisers at Hall Financial.