Basics of the Loan
USDA loans started in 1991 with an aim of boosting rural population and home ownership among rural residents. It is given for primary residence and the applicant should have the capability of being able to repay the loan, however, should not be able to take a second loan. Credit score of 640 is the minimum requirement for the application, however, frequent exceptions are made for the applicants based on their income.
Though USDA loans are given for rural area, they are not given to buy a second home, buy agricultural land and for speculation purposes, they are strictly for financing primary residence.
Eligibility for the loan
A USDA loan is for the applicants from rural area and small towns. The definition of small town in given in USDA that is modified as per Census report every few years. Hence, you might have to check whether USDA rules cover your town. Once you have checked about the availability of the rules, here are certain financial checks that you need to go through to get a loan.
Debt to Income Ratio
The combined percentage of PITI (mortgage Principal, Interest, Taxes and Insurance) should not exceed 29 percent of your total monthly income and total mortgage should be less than 41 percent of the monthly income.
Credit Score
You need a minimum score of 640. In case your score is less than 640 because you do not have a FICO recent history; exception can be made. Exceptions are based on your salary, present mortgage and your capability to pay the loan in the future.
Overall Income
While total income is calculated factors such as size of the family, future earnings prospect, disabilities and dependents are taken into consideration along with other factors.
Age and Other Qualification
You need to be minimum 18 years of age and a US citizen or a US national or a qualified alien.
Types of Loans
There are two kinds of loans given by USDA. First is direct loan, that is given directly by USDA and second is the guaranteed loan that is issued by the bank and guaranteed by USDA home loans. The requirement for both varies. Here is a quick reference for both.
Direct loan
Given directly by USDA to low income applicants, whose income is less than 80% of the area median income.
Guaranteed Loan
Given by the banks to applicants with broader income and the income has to be less than 115% of the area median income.
Conclusion
When you are moving to rural Texas and looking for a house USDA home loans can help you in getting the house that you need and help you with the down payment and even with the closure.
