Borrower Requirements
As an applicant, you must meet several key requirements to be eligible for a USDA-guaranteed home loan.
You must have legal status to reside in the United States to be eligible for a USDA loan.
- U.S. Citizen
- U.S. Non-Citizen National
- Qualified Alien with valid documentation
Lenders will require documentation, such as a passport or green card, to verify your status.
Your DTI ratio helps lenders assess your ability to manage monthly payments. It compares your total monthly debt payments to your gross monthly income.
- PITI: The "front-end" ratio, which is your proposed monthly housing payment (Principal, Interest, Taxes, Insurance), should generally not exceed 29% of your gross monthly income.
- Total Debt: The "back-end" ratio, which includes your housing payment plus all other monthly debts (car loans, credit cards, student loans), should ideally be 41% or less of your gross monthly income.
- Flexibility: Higher ratios may be approved for borrowers with strong compensating factors, like a high credit score or stable employment history.
A unique requirement of the USDA program is that it's designed for those who can't get a conventional loan.
This means you must demonstrate that you have been unable to secure a home loan from other sources without Private Mortgage Insurance (PMI). Lenders will typically document this as part of the application process. This rule ensures the program serves its intended audience of low- to moderate-income homebuyers.
The property you finance with a USDA loan must be your primary residence, where you intend to live for the majority of the year.
- No investment properties are allowed.
- The home cannot be used primarily for business or as a vacation home.
- You will be required to sign documents at closing affirming your intent to occupy the property.