USDA Lending Guidelines
The U.S. Department of Agriculture has a loan guarantee program that ensures payment of home mortgages if the borrower defaults. The program will finance 100 percent of the appraised value of the home, so no down payment is needed. This makes house more accessible for low-income people. Also, because the government is backing the loan, lending institutions are more willing to offer a mortgage to a low-income family.
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Income
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While you must have a source of steady and reliable income to apply for a USDA loan, you also need to meet certain income requirements. Your annual household income cannot exceed the moderate income limit for the area where the home is located. The USDA Rural Development field office can tell you what the limit is in your area. Household income is generally considered the gross income of all people living in the house, though you can make small adjustments for dependents and child care.
Credit and Ability to Repay
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You must possess a decent credit history that shows you are willing to pay your debts when they are due. You must also have the ability to make the loan payments. To determine this, divide the principal, interest, taxes and mortgage insurance by your gross monthly household income. The quotient must be less than 29 percent. In addition, your total monthly debt payments must measure less than 41 percent of your gross monthly household income.
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Be In a Rural Area
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The home must be located in an eligible rural area: open country not associated with an urban area, towns with a population of less than 10,000 that are in a rural area, or towns with a population of less than 20,000 that are not in a Metropolitan Statistical Area. Also, any area classified as rural prior to 1990 and which has a population greater than 10,000 but less than 25,000 with a lack of mortgage credit for low- and moderate-income families qualifies for the loan.
Obligations
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Recipients of a USDA home loan must agree to maintain the property so that it is decent, safe and sanitary. It must be owner occupied and the owner must comply with all applicable program rules and regulations. Finally, the owners must make their mortgage payments.
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