There is no down payment requirement – You can borrow the full purchase price of the home with a USDA loan. There is a funding fee of 1% that can be financed into the loan, on top of the purchase price. In addition, other items including closing costs can also be financed if the appraisal is high enough. For example, John and Leslie have a agreed to purchase a home for $100,000, but the home appraises for $103,000. USDA allows them to borrow $103,000 plus the 2% for the funding fee, using the $3000 to pay down consumer debt, pay closing costs, or purchase new furniture.

Under USDA loan requirements, the amount of closing costs the seller can pay for the buyer is limited to 6% of the purchase price. In our example, John and Leslie could ask their seller to pay $6000 toward buyer closing costs (6% of the $100,000 purchase price).

USDA loans sometimes allow for credit scores as low as 600 with good credit explanation. Alternative credit can be used for those without substantial credit. Landmark Mortgage Planners has even successfully processed USDA loans where the buyer is just 1 year out of bankruptcy, but has an excellent explanation and strong re-established credit.

The housing ratio according to USDA loan requirements can be up to 29% of gross income. Total debt can be 41% of the buyer’s gross income. If John and Leslie make $5000 each month, then they would be allowed a mortgage payment of $1450 (5000 x 29%), as long as their other debt exceed the total debt ratio.  Our Landmark Mortgage Planners can help you determine if you qualify for a USDA loan, and compare other programs to determine the best option for you. We will also determine the maximum home price that you can be approved for and provide a pre-approval letter.

Buyers are not required to have seasoned funds, bank statements or even bank accounts.

The only restriction is that buyers using USDA financing cannot own a suitable property in the local commuting area.

Many programs, like FHA, require that the seller of the property own the home for 3 to 6 months or longer. There are no title requirements for USDA loans.

Great rates are available through USDA Loans. They also offer 30 year fixed terms and less eligibility issues than VA or many other programs.