USDA Loan Eligibility and Qualifications

Find Out if You Qualify for a USDA Home Loan

U.S. Department of Agriculture (USDA) loans can be an affordable path to homeownership for low- to moderate-income American families in certain rural and suburban areas. In fact, about one in four Americans may live in a USDA-qualifying area. But how do you know if you meet the eligibility requirements for a USDA home loan?

Let’s break down the qualifications so you can determine your eligibility. Knowing what to expect can help you prepare financially, strategically narrow your home search, and move through the loan process more smoothly.

An Overview of Qualifications for a USDA Home Loan

USDA mortgage loans have some basic primary qualifications:

• Income: Your household income must fall within a certain USDA-approval limit.
• Credit: You typically need a minimum credit score of at least 640.
• Location: The home you want to buy must be in an eligible rural or suburban area.

Understanding these qualifications can help you determine if you’re a good fit for the USDA program before applying to buy a home with this type of loan.

USDA Home Loan Eligibility for Borrowers

USDA loans can be a helpful financing option for buying a home since they can have lower interest rates and usually no down payment requirement. However, borrowers must meet specific personal and financial criteria to qualify:

• Income: You’ll need to show proof of a stable income, such as through pay stubs and tax records. This is so lenders feel confident in your ability to afford your USDA loan.
• Primary residence: You must plan to live in the home you purchase with a USDA loan as your primary residence (which means it can’t be a second home or investment property).
• Debt-to-income ratio: Most mortgage lenders prefer a debt-to-income ratio (DTI) of 43% or less. If yours is a little higher, you may still be able to qualify if you have a higher credit score or a qualifying amount of savings.
• Credit: The minimum credit score requirement for a USDA loan is 640. The USDA also requires a good track record of making consistent on-time payments. At Freedom Mortgage, however, we consider applicants with credit scores as low as 620.
• Citizenship: You need to be a U.S. citizen or permanent resident.

Property Qualifications for USDA Loans

Meeting borrower requirements is just part of the USDA loan application process—the property must also meet USDA standards to ensure the home is safe, correctly priced, and located in an eligible rural or suburban area.

• Rural area: You must live in an area eligible for USDA loans, which is typically rural but can be suburban based on the population. The USDA defines “rural” as open country that’s not part of an urban area. Population limits include up to 10,000 for places located within Metropolitan Statistical Areas (MSAs) and up to 20,000 in places outside of MSAs. Sometimes, populations up to 35,000 are allowed if the area was once considered rural but lost its status in a previous U.S. Census.
• Property type: Eligible USDA properties include single-family homes, certain condos, and some manufactured homes (if they meet standards set by the USDA and the U.S. Department of Housing and Urban Development).
• Condition: The property must be safe, sanitary, and structurally sound. The USDA requires home appraisals to verify the home’s value and check that the home is considered safe and livable. Issues like faulty wiring, leaking roofs, or structural damage will be assessed to determine if the property meets USDA requirements.

Other USDA Qualifications

Some USDA loans have additional requirements you must meet, such as:

• Household income: Income requirements for USDA loans are based on everyone in the home, not just the primary loan applicant. The household income can’t exceed 115% of the median income of the area where you’re buying a property.
• Shortage of affordable mortgages: For areas with populations between 10,001 and 35,000, there must be a notable lack of affordable housing options.

For example, with USDA Single Family Housing Direct home loans (also referred to as Section 502 Direct Loans), you must also have:

• Inadequate housing: Applicants must lack “decent, safe, and sanitary” housing before applying. This requirement doesn’t apply to the more common USDA Guaranteed Loan Program.
• Lack of other loan options: You must have been unable to get a mortgage loan with reasonable terms and conditions from other resources prior to applying for a USDA Single Family Housing Direct home loan.

How To Check Your USDA Home Loan Eligibility

The USDA provides tools to help you determine if you’re eligible for a home loan, so you can either move forward and apply or take steps to ensure you meet qualifications.

• Verify income eligibility: You can check income eligibility on the USDA’s website to see if your household income falls within USDA limits in your area.
• Search property eligibility: You can use the USDA’s interactive property eligibility map to see if the property address qualifies.
• Check with your lender: A USDA-approved lender like Freedom Mortgage can help verify if the property meets USDA qualification requirements and if a USDA mortgage is your best home financing loan.

USDA Home Loan Qualification FAQs

Here are some answers to questions you may still have about USDA loan eligibility:

Is It Hard To Get Approved for a USDA Loan?

Not necessarily or usually. The biggest challenges in getting approved will likely be staying under the income limit and finding a home in an eligible area.

If you meet those qualifications and have manageable debts and a credit score of 640 or higher, USDA loan approval can be straightforward.

What Would Disqualify You from Getting a USDA Loan?

You could be disqualified from getting a USDA loan if your household income is too high, or if the property isn’t located in an eligible rural area or doesn’t meet the USDA’s safety and livability standards. Also, you may not qualify if your DTI ratio is too high or your credit score is too low.

Do You Have To Buy a Home on Farmland To Qualify for a USDA Loan?

No, because USDA loans apply to rural areas, and not all rural areas are considered farmlands. USDA guidelines classify a rural area as somewhere outside of a metropolitan area, typically with a local area population up to 35,000 people.

A Summary of USDA Loan Qualifications

Knowing USDA qualifications can help you avoid surprises during the homebuying process. Once you’re confident you meet the property, income, and credit requirements, Freedom Mortgage can help guide you through the USDA loan application process quickly and easily.

Ready to take the next step and find out how much money you can save with a USDA loan? Get started today!