The USDA Home Loan, or rural development loan, is a low-interest government-sponsored mortgage available for designated rural and suburban areas.
The USDA Loan is a 0% down payment mortgage designed to help low- to moderate-income households purchase, build, rehabilitate, or improve a home. To qualify for a USDA loan, you must purchase a home in a USDA-approved area and meet certain income requirements.
CMG Financial has been named a Best USDA Mortgage Lender by Business Insider.
USDA Loan Eligibility
To apply for a USDA Loan, you must have:
- Proof of citizenship (or legal permanent residency)
- A minimum credit score of around 620 (credit score requirements might vary per borrower)
- A debt-to-income (DTI) ratio of 41% or less
- Have an income no higher than 115% of the median household income in your area
- Be financing a primary residence in a USDA-approved location
USDA Loan Credit Score Requirements
The USDA loan has no minimum credit score requirement; however, most lenders look for aFICO® credit score of at least620. For those with lower credit scores, a USDA loan may still be possible with manual underwriting, depending on other individual financial circ*mstances.
USDA Loan Down Payment Requirements
USDA Loans are one of two major mortgage products that offer 100% financing — meaning that no down payment is required.
USDA Loan Debt-to-Income Ratio (DTI) Requirements
Strive for a DTI no higher than 41% when applying for a USDA Loan. Your DTI is your total recurring monthly debts (student loans, credit card payments, etc.), divided by your monthly pre-tax income, expressed as a percentage. For example, if your rent is $1,000 per month, your car payment is $500 per month, and your monthly credit card payment is $800, your total monthly debt is $2,300. If your gross income is $6,000 per month, then your DTI is roughly 38% (2,300 ÷ 6,000 = 38.3).
USDA Loan Income Eligibility
USDA loans are only available for low- to moderate-income households. To be eligible for a USDA loan, your income must not exceed 115% of the median household income in your area. You can check USDA Loan income limits here.
Mortgage Insurance for the USDA Loan
There is no mortgage insurance requirement for USDA Loans.
Properties Eligible for a USDA Loan
Eligible USDA properties are single-family, primary residences located in designated rural or suburban areas. You can locate USDA eligible areas by searching the USDA loan eligibility map. There is no maximum purchase price or acreage limit, however all residences must meet HUD’s minimum requirements.
How to Apply for a USDA Loan
To apply for an USDA mortgage you will need to provide the following:
- Proof of income and employment (pay stubs, tax returns, W-2 statements etc.)
- Proof of citizenship and home location
- Documentation of financial assets (bank statements, etc.)
- Residential history (previous two years’ worth)
- Your credit history (it’s also a good idea to check your credit report - not score - here)
- Identity information like your driver’s license, Social Security card, and date of birth in order to apply
To start your USDA Loan application and get preapproved click here, to find a local loan officer click here.
If you have questions and want to speak to someone right away, give us a call at 1.833.362.0619.
FAQs
Eligibility Requirements – New Jersey
Plus, with no maximum loan amounts, they're flexible enough to meet most any situation. For a family of 1-4, the average household income limit for a USDA loan in New Jersey is about $115,150 a year, and the limit can be as high as $184,750 for families of 5 or more.
Is a USDA loan the same as rural development? ›
USDA loans are guaranteed by the USDA Rural Development Guaranteed Housing Loan Program, a part of the U.S. Department of Agriculture. Most USDA loans are issued by partner lenders, though the department can grant them directly to qualified borrowers with incomes below a certain limit.
What is the difference between a USDA loan and a USDA direct loan? ›
Guaranteed loans are made by private lenders such as banks, whereas direct loans are made by USDA. Borrowers with incomes up to 115% of U.S. median income can qualify for guaranteed loans, while direct borrowers have incomes not more than 80% of area median.
Which of these individuals may benefit from USDA rural development program offerings? ›
An individual who may benefit from USDA Rural Development program offerings includes individual people, businesses, schools and universities, utility companies, and governments, particularly those in rural or agriculturally-focused sectors.
How do I qualify for an USDA loan in NJ? ›
Basic qualifications include:
The property must be owner-occupied. Investment or vacation properties are not eligible for USDA loans. You must meet the income restrictions for the county the property is located in. Each county has a maximum income limit defined by the USDA.
What is the lowest income for USDA loan? ›
USDA income limits also have a floor that is based on household size:
- 1 – 4 member household must have a minimum annual income of $86,850.
- 5 – 8 member household must have a minimum annual income of $114,650.
USDA loans offer some of the most competitive interest rates in the mortgage market, making homeownership more accessible for low- and moderate-income families in rural areas. On average, USDA interest rates are around 0.5%–0.75% lower than other mortgage programs, like the FHA loans and conventional loans.
Can you buy down interest rate on USDA loan? ›
This answer is True. Discount Points may be used to permanently buydown the interest rate. USDA has published internal thresholds allowable for lender points, fees, and charges.
What is the difference between FHA and USDA loans? ›
USDA home loans have stricter income limits than FHA loans and also require you to live in an eligible rural area. Your home address and annual household income determine your borrower eligibility for USDA loans. FHA borrower requirements, on the other hand, are more lenient as you can have a lower credit score.
What credit score do you need for a USDA guaranteed loan? ›
Approved USDA loan lenders typically require a minimum credit score of at least 620 to get a USDA home loan. However, the USDA doesn't have a minimum credit score, so borrowers with scores below 620 may still be eligible for a USDA-backed mortgage.
USDA Loan Debt-to-Income Ratio (DTI) Requirements
Strive for a DTI no higher than 41% when applying for a USDA Loan. Your DTI is your total recurring monthly debts (student loans, credit card payments, etc.), divided by your monthly pre-tax income, expressed as a percentage.
What is the debt to income ratio for a USDA loan? ›
Your DTI must be lower than 41% to qualify for a USDA loan. USDA loans have a few unique requirements. First, you can't get a USDA loan if your household income exceeds 115% of the median income for an area.
What is the minimum credit score for USDA loan 2024? ›
USDA Home Loans 2024 Minimum credit score 620, income limits 115% of area median income, debt-to-income ratio below 46%. Home must be primary residences, and cannot have income-producing amenities. ADU is acceptable.
What happens to my USDA loan if my income changes? ›
Can our payment change? Annually, the amount paid by you and Rural Development is reviewed. Your payments can change based on changes in your total household income. Usually, if your income increases, your mortgage payments will increase.
What are the advantages of USDA loans for eligible borrowers? ›
The benefits of USDA loans include no down payment requirement, lower credit score requirements, competitive interest rates, and no PMI required for low or no down payments.
What is USDA payment to income ratio? ›
The standard debt to income (DTI) ratios for the USDA home loan are 29%/41% of the gross monthly income of the applicants. The maximum DTI on a USDA loan is 34%/46% of the gross monthly income. USDA will allow these DTI ratios with compensating factors.
What is the USDA definition of household income? ›
Income of all household members from all sources (unless excluded by. the program): • Any person expected to reside in the home. • Includes a household member that is temporarily absent. • Does not include live-in aids and foster persons (income received.
How much of the US is USDA eligible? ›
USDA Loan Property Eligibility Requirements
According to the Housing Assistance Council, a whopping 97% of U.S. land is located within USDA-eligible boundaries. Those areas claim about 109 million Americans — or around a third of the country's entire population.
What are the rural counties in New Jersey? ›
These counties are Atlantic, Cape May, Cumberland, Hunterdon, Salem, Sussex, and Warren.
