To be eligible for a USDA loan, applicants must meet the basic eligibility requirements set forth by the USDA, which cover credit, income, property usage and home location.
Each factor plays a significant role in meeting the USDA’s mission of providing safe and sanitary housing for low to moderate-income families.
USDA Loan Credit Requirements
Applicants must show stable and dependent income and a credit history that demonstrates the ability and willingness to repay the loan.
There is no minimum credit requirement for the USDA loan. However, applicants with a credit score of 640 or higher are eligible for the USDA’s guaranteed underwriting system – an automated underwriting process. Applicants below the 640 mark may still be eligible, but are subject to manual underwriting.
To determine creditworthiness, your lender will review items such as:
- Credit score
- Repayment patterns
- Credit utilization
- Length of credit history
Applicants without established credit may still be eligible, but will require credit verification from alternate sources, such as rent payments, utility payments and insurance payments.
Lenders may have their own internal guidelines and requirements in addition to those set by the USDA’s Rural Development program.
USDA Loan Income Requirements
The USDA requires that applicants have stable income that is verifiable and likely to continue. Unverified income will not be counted as repayment income.
Lenders generally look for two years of consistent employment and will request two years of income tax returns and recent paystubs to verify.
Employment and income scenarios are always evaluated on a case-by-case basis. Income guidelines and policies can vary by lender.
USDA Loans and Max Income
The USDA also sets a maximum on the amount of income a household brings in at the time of the guarantee. This is to ensure the USDA’s intended recipients in the low to moderate-income group use the program.
USDA loan income limits vary by location and household size and have a base income-limit set at 115% of the median household income for the area.
USDA Loan Location Requirements
The USDA loan is designed to help those in rural areas purchase a residential home. Fortunately, the USDA’s definition of rural is generous and many suburbs of larger areas qualify.
According to the USDA, rural areas are defined as open country, which is not part of an urban area. There are also population requirements that can reach up to 35,000 depending on area designation.
To find eligible areas, you can use our property eligibility map here. Although the map is helpful, is best to speak with a USDA lender to determine eligibility.
USDA Loan Property Requirements
The USDA loan’s goal is provide a safe and sanitary residence for low to moderate-income households. Through the USDA loan, eligible homebuyers can purchase, build or refinance a home.
To meet this goal, the USDA sets basic property requirements that protect homebuyers as well as lenders. These property requirements include:
- The home must be used as the homebuyer's primary residence
- The site must have direct access to a street, road or driveway
- The property must have adequate utilities and water and wastewater disposal
A final consideration is that the USDA loan cannot be used to purchase an income-producing property. However, if the property includes barns, silos, commercial greenhouses or livestock facilities that are no longer used for commercial operation, the property may still be eligible.