How To Get a USDA Loan

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FACT-CHECKED
Published Nov. 7, 2022
Mother and child pet bunnies outside their rural home.

Loans backed by the Department of Agriculture are designed to make buying a home more affordable for borrowers with low to middle income who want to live in rural areas.

Because USDA loans are guaranteed by the federal government, the lender takes on less risk if the borrower defaults. That allows mortgage lenders to be more generous with their eligibility requirements for USDA loans, which have no down payment requirement.

Who Can Get a USDA Loan?

USDA loans are available only to borrowers who meet specific eligibility requirements. To get one, you’ll need to meet the following USDA loan requirements:

  • Borrower requirements:
    • You must be a U.S. citizen or U.S. noncitizen national, or have qualified noncitizen status.
    • You must occupy the home as your primary residence.
    • You must be unable to obtain a conventional loan without private mortgage insurance.
    • You must be eligible to participate in federal programs.
  • Credit score requirements: Though the USDA doesn’t have a specific credit score requirement, many lenders that issue USDA-backed loans prefer a credit score of at least 640.
  • Debt-to-income ratio requirements: Your DTI ratio is a figure that lenders use to see how much of your income goes toward repaying debts. To get a USDA loan, you’ll typically need a DTI ratio that doesn’t exceed 41%.
  • Income limits: Your annual household income cannot exceed 115% of the median household income in that area.

Property Eligibility Requirements for USDA Loans

Not all properties are eligible for a USDA loan. Here are some of the requirements that the home will need to meet to qualify:

  • The home must be in a designated rural area. You can use the USDA’s online tool to see if a particular property is eligible.
  • The property must be in good condition. The home must meet standards set by the Department of Housing and Urban Development. You can find more details on these requirements in HUD’s handbook.
  • It must be a single-family dwelling. This includes detached homes, attached homes, condominiums, modular homes, and manufactured homes. These homes generally cannot be larger than 2,000 square feet.
  • The home must have road access. The home needs to have access to paved roads.
  • The home must come with basic utilities. Eligible homes will have sufficient water and wastewater disposal systems.

6 Steps To Buying a Home With a USDA Loan

Is a USDA loan right for you? If the answer is yes, here are the steps to buy a home with a USDA loan:

  1. Find an approved lender. The first step to getting a USDA loan is finding an approved lender. The USDA’s website includes a state-by-state list of lenders. If you’re looking to apply for a single-family direct home loan, contact the closest USDA service center.
  2. Find a USDA-eligible home. The USDA property eligibility map can give you an idea of which areas qualify for USDA loans. You also can work with a real estate agent to search for listings in eligible areas.
  3. Make a successful offer. Once you’ve found a home to buy, it’s time to make an offer. The seller will need to accept the offer for you to proceed with a USDA loan.
  4. Go through underwriting. USDA loans require an underwriting process to examine your finances, and verify that you can afford to pay back the loan. USDA underwriting also requires an appraisal to confirm the property is eligible for the loan.
  5. Get final USDA loan approval. The USDA needs to sign off on your loan, giving it what’s known as the “clear to close.”
  6. Close the deal. This is where you’ll sign the necessary paperwork, pay closing costs — and get the keys to your new home.

FAQ: Getting a USDA Loan

Here are answers to some frequently asked questions about getting a USDA loan.

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