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USDA Loan (502 Guaranteed Loan)

What is a USDA Loan?

The Section 502 Guaranteed Loan Program (USDA Loan) helps authorized lenders offer 100% financing to low- and moderate-income families living in eligible rural areas who want to purchase, build, rehabilitate, improve, or relocate their primary residence. This program aims to ensure that these households have access to suitable, basic, and safe homes. Approved lenders are guaranteed 90% of the loan amount, which reduces their risk when providing 100% loans to eligible rural homebuyers, who may qualify for a zero down payment.

How do you determine if a property is eligible? 

Over 90% of the United States is USDA eligible. Chances are the property you are looking at is eligible if it’s not in a metropolitan area.

Click here to check if the property you’re considering is in the boundary 

Who can apply for a USDA Loan?

Applicants must:

  • Meet income-eligibility (cannot exceed 115% of median household income)
  • Agree to personally occupy the dwelling as their primary residence
  • Be a U.S. Citizen, U.S. non-citizen national or Qualified Alien

How can the funds be used?

  • New or existing residential property to be used as a permanent residence. Structures can be detached, attached, Condos, PUDs, Modular, or Manufactured. (Cannot be an income-producing property). Closing costs and reasonable/customary expenses associated with the purchase may be included in the transaction
  • A site with a new or existing dwelling. No set acreage limits. 
  • Repairs and rehabilitation when associated with the purchase of an existing dwelling
  • Refinancing of eligible loans – for existing USDA borrowers only
  • Essential household equipment such as wall-to-wall carpeting, ovens, ranges, refrigerators, washers, dryers, heating, and cooling equipment if the equipment is conveyed with the dwelling
  • Site preparation costs, including grading, foundation plantings, seeding or sod installation, trees, walks, fences and driveways

What are the credit requirements?

While there is no minimum credit set by the USDA. Most lenders require that borrower shows that they are willing and able to repay the debt and usually requires a minimum of a 640 credit score.

What are the terms?

USDA only allows 30 year fixed terms.