To check on income limitations by county, go to the USDA income eligibility site.
Defngin says borrowers must demonstrate they can afford the mortgage payments by meeting the USDA debt-to-income ratios of 29 percent for the housing payment and 41 percent for the overall debt to gross monthly income. In special cases for borrowers with higher credit scores, those debt-to-income ratios can be exceeded.
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Additional USDA loan rules
The borrower pays an upfront guarantee fee of 1 percent of the loan amount, which most opt to roll into the loan. There is an annual fee, paid in equal monthly installments, of 0.35 percent of the loan amount. Under some first-time buyer programs, borrowers can have their closing costs paid.
USDA loans are not available to investors. The home must be the borrowers' primary residence. Most construction types are eligible, including manufactured and modular homes, as long as they meet condition standards.
Nick Serrano, sales manager for Greater Nevada Mortgage Services in Carson City, says the program is for people who do not currently own homes.
"The program isn't limited to first-time buyers, but if someone owns a house and wants to buy another with this loan they have to sell it first and pay off the mortgage in full," Serrano says.
Unlike most low or no-down-payment loans, Defngin points out, USDA loans do not require mortgage insurance.
Lenders qualify borrowers based on their credit score and their debt-to-income ratios. USDA does not set a minimum credit score, and lender minimums vary. Xintaris says Envoy Mortgage requires a minimum score of 600, while Serrano says Greater Nevada Mortgage Services requires 620 and Defngin says Apex Home Loans requires a 640 credit score.
Advantages of USDA program
USDA home loans are not subprime. Serrano says, "A lot of people are frightened by the idea of zero percent financing, but this loan is very different from subprime loans. First, the loans are guaranteed by the government. Also, the loans are stable, 30-year fixed-rate products and borrowers must fully document everything and qualify for the loan."
Serrano also says, "USDA loans used to be the best-kept secret, but now this loan program has momentum."
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