USDA Loans Program | Guide | Requirements, Eligibility, and Qualifications

Overview of USDA Loans Program Guide

When buying a home or property, you need financing unless you plan to buy the home with cash. Since most potential buyers do not have enough cash on hand to purchase a home, obtaining a loan is often the.

The issue with this is that getting a home loan can be difficult if your credit is shaky or you lack sufficient income and good payment history.

Additionally, if you are looking for money to fund a business property or residential home in a rural area, it can feel overwhelming to know where to look for loans.

However, the United States Department of Agriculture (USDA) offers a USDA loan program, which can help ease the stress and financial burden that accompanies the loan and home buying process. But what are the USDA home loan requirements?

This USDA loans program guide aims to reveal the USDA home loan requirements and explain what’s needed to participate in a USDA home loan program.

You’ll find out about key details regarding the USDA home loan eligibility requirements, including USDA loan program qualified income levels, the location qualifications for USDA loan program participation, the advantages of loans from the USDA, different types of home loans from the USDA, and loans for business from the USDA.

Now, let’s explore all you need to know about USDA home loan requirements, USDA loan eligibility, and more.

What People Want to Know About the Requirements, Eligibility, and Qualifications of USDA Loans Programs

If you think that you’re the only one wondering about USDA loan requirements, USDA loan eligibility, and what the USDA home loan qualifications are, then think again.

There are a number of similar questions on the internet. Here are a few questions individuals have regarding loans from the USDA:

What are some USDA loan requirements that I would need to fulfill to participate in a USDA loan program?
Which homes or locations meet the USDA loans guidelines?
How can I find out if I meet USDA loan qualifications?
What are the USDA loan requirements for the USDA rural housing loan?
What are the USDA loan eligibility requirements for business income?
What are the USDA loan qualifications based on income?
How long does the USDA loan eligibility verification process take?
What are the benefits for getting loans from the USDA?

Advantages of USDA Loans

Source: USDA loans

Loans from the USDA offer a surprising number of advantages for low-income buyers who want to buy rural property for their homes or businesses. Here are few advantages to getting loans from the USDA:

Loans from the USDA generally offer lower interest rates than conventional loans.
It may be easier to meet USDA loan requirements than the loan requirements for conventional housing and business property loans.
Potential homeowners can possibly get a home in a large yard with other homes that meet USDA loans guidelines for the definition of a rural community.
USDA home loan eligibility often targets property buyers with moderate to very low income, which makes for less competition than conventional loans.
USDA loans guidelines often offer flexible repayment, down payment, upfront costs, and financing terms so that buyers with very low to moderate income have more access to homes in rural areas.

Don’t Miss: Credit Score for Mortgage Loans for this year (Good Credit Score Needed to Buy a House)

Types of Loans from the USDA

There are several types of USDA loans that businesses and individuals can obtain. Here are a few to consider:

Single Family Housing Guaranteed Loan Program

Source: USDA loans guidelines

With this USDA home loan, lenders can provide loans to individuals with moderate or low incomes to find homes that meet the USDA home loan qualifications of safe, decent, sanitary, and modest homes in rural areas as their primary residences.

This USDA home loan also enables individuals who meet USDA loan qualifications to not only purchase a house but to improve, build, relocate, or rehabilitate an eligible rural area dwelling. Individuals can receive 100 percent financing with this USDA home loan program as well.

This USDA loan program is referred to as a guaranteed loan because it guarantees 90 percent of the loan, should the borrower default on the USDA rural housing loan.

Single Family Housing Direct Home Loans (Section 502 Direct Loans)

These USDA home loans come directly from the government and can help you to get safe, decent, and sanitary housing if you have low or very low income and want to live in a rural community. To qualify for this loan, the applicant cannot have been barred from or suspended from federal programs participation.

Also, the applicant must agree to use the home as their primary residence in a home that is not more than 2,000 square feet. Other USDA home loan qualifications for this USDA loan include being an eligible noncitizen or being a U.S. citizen, being unable to obtain other finance, havingthe legal mental ability to have a loan obligation, and being without a safe, sanitary, or decent form of housing.

Multi-Family Housing Direct Loans

Source: USDA loans

This USDA loan program is designed to help individuals and organizations get access to financing affordable housing for rent to disabled, elderly, and low-income individuals in rural communities in multi-family rental homes. Borrowers of the USDA loan program can use it to maintain, operate, or construct the multi-family housing unit. This USDA rural housing loan provides both competitive loans and direct loans from the government. Borrowers can receive low interest rates and take up to 30 years to pay the loan back as well.

Farm Labor Housing Direct Loans

This USDA loan program is designed to assist applicants who are unable to obtain commercial credit. It then allows applicants that meet USDA loans guidelines to charge rent to low-income tenants. If approved, you can take up to 33 years to pay back your loan. The loan has a one percent fixed interest rate. This loan is based on a first-come, first-served basis. As well, the loan may not exceed 90 percent of project cost.

With this particular USDA home loan, the owner can build housing as a way to assist his seasonal or migrant workers on his property. In order to maintain the USDA rural housing loan, owners must offer a low monthly price. The tenants also must be U.S. citizens or permanent residents. Retired and disabled farm laborers are allowed to pay rent at the location as well.

Business & Industry Loan Guaranteed Loans

If your business is in a rural area or you plan to locate your business in a rural community, the USDA offers the Business & Industry Guaranteed Loan Program.

If you meet the location and income USDA loans guidelines, you can use this business loan for various business activities, including buying real estate and buildings. One of the USDA loan requirements to apply for this USDA rural housing loan is that you have to apply through your state’s Rural Development Field Office.

USDA Loan Eligibility Basics

Many of the USDA loan qualifications are based on the location of the desired property and the income level of the individual or business that needs the property.

Let’s take a look at some of the USDA loan eligibility and USDA loan qualifications based on income and location for the Single Family Housing Direct USDA home loan program, Single Family Housing Guaranteed USDA rural housing loan, Multi-Family Housing USDA rural housing loan, and Rural Business Loans.

USDA Loan Qualifications Based on Income Eligibility

Source: USDA home loan eligibility

The USDA loan program is primarily designed to help those who have had issues getting loans from lenders due to a variety of reasons, including lack of credit or insufficient income.

The income eligibility could change, as the amount will be based on how many dependents you have and which loan you seek. Also, the USDA home loan qualifications for income eligibility are based on the median income in the given area you want to purchase.

USDA loan guidelines generally suggest the applicant first go to the website and fill out the online form. This step allows you to determine if you are eligible or ineligible to participate in a USDA rural housing loan program based on the information you provide.

Each USDA loan program has its own specific USDA home loan requirements for income that borrowers must meet. For example, to meet USDA home loan eligibility requirements in the Cape Coral-Fort Myers, Florida, metropolitan area for the Single Family Housing Guaranteed Loan Program, your household income must fall below $75,650 for a family of four people, as of 2016.

In contrast, the highest income level for the same four-person household in the Cape Coral-Fort Myers metro-area cannot exceed more than $61, 600 for the Single Family Housing Direct Loan, as of 2016.

Additionally, the amount of financial assistance you can get for some loans from the USDA depend on the adjusted family income. The main USDA loan eligibility requirements for many USDA rural housing loans is that income must be below or at the income level for the area where the dwelling is located.

For example, the Single Family Housing Direct Loan minimum USDA loan eligibility criteria for income in the Gainesville, Florida, Metropolitan Statistical area includes incomes at or below $63,800 for families of one to four persons per household based on the adjusted median income for the area, as of 2016.

USDA Loan Eligibility for Locations

Not all locations will be qualified for the USDA loan program. However, you don’t have to worry because the USDA provides a website that will quickly tell you if the location you plan to reside meets USDA loan eligibility requirements. Also what the USDA defines as rural can depend on the area.

You may be surprised to learn that not all rural areas have to be in locations tens of miles away from a local grocery store or even from the nearest city. For example, there are homes in Collier County, Florida, near the city of Naples, that are considered to be in rural communities.

This means that instead of expecting tens of acres of lands, you may just find a home on an acre or two of land in a spacious community. You can search a wide range of rural areas to see which home will be best suited to meet your needs.

The site also notes for applicants that even though the area might indicate that it is a home that meets USDA home loan eligibility, that it might in fact not be approved.

These homes many become ineligible during the application process for a variety of reasons. The good news is that it does not happen often, but it’s still the USDA’s way of making sure you know the system is not perfect and that something could go wrong. To find out if the home or property is considered eligible, check the USDA rural development map.

How to Find Out if You Meet USDA Loan Requirements

Source: USDA loan requirements

Under each USDA loan program, USDA loans guidelines will vary. It’s advisable to read each section of USDA loan qualifications of the specific USDA rural housing loan you seek before filling out and submitting your application. By doing this, you can reduce the risk of being denied and ensure you meet basic USDA loan requirements for eligibility.

In general, the USDA loans guidelines require that you must be a U.S. citizen or permanent resident. You will need to provide proof that you were unable to obtain loans from other sources as the reason why you are applying for these USDA home loans, as well.

The great news is that your credit score is not much of a factor as a USDA home loan program for certain applicants. That is because USDA loan requirements for applicants tend to be more flexible than conventional loans regarding credit or payment history. For example, some USDA home loans allow certain applicants to use utility bills and other unconventional proofs of payment history as a way to show that you are making your payments on time.

To find out if you meet the USDA loan qualifications, it’s a good idea to take the USDA loan qualifications test on the USDA’s website. It’ll test whether or not you can pass the USDA loan requirements for both property and income USDA loans guidelines.

Free Wealth & Finance Software - Get Yours Now ►

Final Thoughts

When you’re looking for a home loan or a loan for your business in a rural area, you don’t have to get overwhelmed with the search. Loans from the USDA offer a multitude of options for financing rural property.

You can choose USDA home loans or business loans from the USDA to fund the property you need. You don’t even have to be a farmer to get USDA home loans (although it can be enticing to be one with all the funding options available).

The main factor is that you must meet the USDA loan qualifications to take advantage of any of these loans from the USDA.

Once you meet the USDA loan qualifications and pass the USDA loan eligibility test, you can move from a USDA rural housing loan applicant or rural business USDA loan applicant to a USDA loan program participant.

AdvisoryHQ (AHQ) Disclaimer:

Reasonable efforts have been made by AdvisoryHQ to present accurate information, however all info is presented without warranty. Review AdvisoryHQ’s Terms for details. Also review each firm’s site for the most updated data, rates and info.

Note: Firms and products, including the one(s) reviewed above, may be AdvisoryHQ's affiliates. Click to view AdvisoryHQ's advertiser disclosures.