The Possible Drawbacks
- Only primary residences can be purchased. USDA loans cannot be used to purchase a vacation home or rental property.
- There are geographical restrictions. Homes in urban centers won't qualify.
- There are income limits.
- Mortgage insurance is factored into the cost.
USDA eligibility is based on a combination of household size and geography, in addition to the typical mortgage approval standards such as income and credit score verification. Households of 1-4 people can have an income up to $91,900 in most of the U.S., and households with 5 or more members can make up to $121,300.
How Much Can You Really Borrow? Even though the USDA Guaranteed Loan has no limit on the amount you can borrow, it's highly unlikely any borrower could get a USDA Loan for more than $300,000-$400,000. Since the USDA loan is geared towards low-to-moderate income families, they have strict income limits.
There are no options to remove or avoid the USDA annual fee unless the mortgage is refinanced to another product or the mortgage is paid off. Learn more about USDA household income limits or property eligibility.
Compare the best USDA lenders
| USDA Lender | Best Feature(s)* |
|---|
| Freedom Mortgage Corp. | Lowest average USDA rates among top lenders |
| Caliber Home Loans | Second-lowest average USDA rates among top lenders |
| Fairway Independent Mortgage | Lowest upfront fees on average |
| Flagstar Bank | Strong customer review scores |
The non-borrower spouse's income may be the deciding factor in determining if you qualify for a USDA mortgage, even if you apply for the loan as a sole borrower. If your household adjusted gross income is greater than the income limit, then you are not eligible for a USDA home loan.
How to find a USDA-approved home. The process of identifying an eligible property is quick and easy. Visit the USDA Income and Property Eligibility website, select the program you're interested in, and just type any address to see if it qualifies.
Is a USDA loan good? A USDA loan is a great option for buyers with moderate or low income. It lets you buy a house with nothing down and low mortgage rates — two huge benefits that only one other loan program (the VA loan) offers. If your home is in an eligible area, it's worth exploring a USDA-guaranteed loan.
Financial EligibilityYou must own or plan to buy 25+ acres of agricultural land. The total loan amount you're seeking must be $50,000 or more. The loan amount must be less than 75% of the property's value. You must be an American citizen or US resident alien.
Answer: No, you can move and sell your home anytime with USDA 502 Guaranteed Loan. The USDA mortgage does NOT have any prepayment or early payoff penalty. You can sell/pay off your loan whenever you like without restriction or fees. This is also the case with other Government-backed loans like FHA and VA.
Who pays for a USDA inspection (and how much does it cost)? It will vary by lender, but the USDA does allow lenders to pass the cost of the appraisal to the buyer. It may also be included in your closing costs. Typically, a USDA appraisal costs between $400 and $500.
Here are some other quick facts about USDA loans: The USDA has strict rules regarding income levels. These rules depend on the location of the home you'd like to buy and the number of people in your household. You're ineligible for a USDA loan if your household income exceeds 115% of the median income for your area.
The USDA AppraisalEvaluate the value and worth of the home on the current market. Ensure the property meets all requirements on the Uniform Standards of Professional Appraisal Practice. Verify it meets state and local building codes.
Sellers should have no concerns about accepting a USDA buyer's offer. Like many things in regards to mortgages, a lot comes down to the lender and their ability to communicate and close loans efficiently.
Qualification is easier than for many other loan types, since the loan doesn't require a down payment or a high credit score. Homebuyers should make sure they are looking at homes within USDA-eligible geographic areas, because the property location is the most important factor for this loan type.
USDA Loan Requirements with a 500 Credit ScoreCredit score of 640 is typically required but we can get it done with lower scores if you have compensating factors. The property must be in a USDA eligible location.
