A USDA loan is a type of mortgage offered by the United States Department of Agriculture (USDA) to support homeownership in rural and certain suburban areas. Designed to help low- to moderate-income borrowers, USDA loans often require no down payment and feature competitive interest rates. These loans are especially beneficial for those looking to purchase homes in eligible rural communities, as they offer accessible financing options and can make homeownership more attainable for a broader range of individuals.
The property must be located in a qualified rural area designated by the USDA. These areas are typically outside urban centers and can vary based on population size and density.
Borrowers’ income must fall within the specified limits for the county where the property is located. Income limits vary based on family size and the local cost of living.
Lenders generally look for a manageable debt-to-income ratio (DTI) that shows the borrower’s ability to afford the monthly mortgage payment along with other debts.
Borrowers should have a stable and reliable source of income, usually demonstrated through employment or self-employment.
USDA loans are primarily intended for owner-occupied properties. The home must be used as the borrower’s primary residence.
The property should meet certain safety and livability standards. Major renovations or repairs might be required before loan approval.