USDA Rural Development Home Loan

The United States Department of Agriculture (USDA) Rural Development Home Loan program allows buyers to be issued a mortgage with 0% down. Buyers can also rely on financial gifts from various sources, including friends and family, to cover the closing costs. The following steps will help outline the process:

Ensure you will be able to afford the mortgage payments:

  • Make copies of your last two federal tax returns,
  • 60 days worth of pay stubs,
  • Credit card and other loan statements,
  • Retirement and other savings account statements, and
  • Checking account statements.

Contact a lender. Let them know that you are interested in a loan insured by the USDA. The USDA doesn’t originate the loan, they only insure it.

Check that you meet the specific requirements for the USDA loan:

    • The home must be purchased as your primary residence and you must occupy the home.
    • You must be able to show a stable source of income.
    • The home must be in a designated Rural Development-eligible area. This can be determined by asking your lender or referencing the USDA home loan site and searching for the address.

  • Give the lender clearance to run a credit check on you and anyone else who may be signing the loan. The lender will run the credit check and get your three-digit FICO score. Your credit score gives the lender a good idea of how well you have managed your money over the years. Issues such as frequently missed credit card payments or defaulting on previous loans will lower your credit score and your chances of getting the best interest rate on a new mortgage. Generally, a FICO score of 620 turns lenders off, but 740 or higher could score you the best interest rate.
  • Send your lender the copies of financial statements you made back in the first step. Your lender will use these to calculate your debt-to-income ratio. Lenders generally want to ensure borrowers do not have debt obligations that exceed 36% of their gross monthly income.
  • Set the closing date. Once your loan is approved, all that is left is to sign the papers and pay the origination fees.

This can be quite a process, but you have help – contact me today and we’ll get started! I will help you find the home which will qualify for a Rural Development loan AND introduce you to lenders who are experts and will guide you through the process.