Officially known as the Section 502 Single Family Housing Guaranteed Loan Program, the USDA loan is a zero down payment mortgage option available to homebuyers in the United States who wish to purchase in a qualified rural or suburban area. USDA loans are issued by private lenders and guaranteed by the U.S. Department of Agriculture (USDA).
Purpose of the USDA Loan
The USDA loan’s purpose is to provide affordable homeownership opportunities to low-to-moderate income households to stimulate economic growth in rural and suburban communities throughout the United States.
These rural development loans are available in approximately 97% of the nation’s land mass, which includes over 100 million people*.
USDA Loan Process
Going through the USDA loan process can be different for each homebuyer; however, the typical flow is as follows:
- Prequalify with Mortgage Brothers
- Provide all necessary documents and reach preapproval
- Find a USDA-approved home in an eligible “rural” area
- Sign a purchase agreement and order a USDA appraisal
- Be patient during loan processing and underwriting, then close on your home!
USDA Loan Income Limits
Because USDA loans are meant to assist low-to-moderate income homebuyers, the USDA sets income limits based on the property’s location and household size. The base USDA income limits are:
1-4 member household: $82,700
5-8 member household: $109,150
USDA counts the total annual income of every adult member in a household towards the USDA income limit, regardless if they are a part of the loan.
But it’s also not as simple as looking at your annual pay. USDA ultimately looks at what it calls adjusted annual income, which takes into account acceptable deductions for things like child care, medical expenses and more.