ELIGIBILITY

A USDA ‘Rural Development’ loan is a zero-down home loan meant for low-to-moderate-income home buyers. As with any state or government program, certain eligibility requirements must be met in order to qualify. 

To start, eligible applicants must be a U.S. citizen or have permanent residency. Income limits are set based on both the household size and the county in which you plan on living. You cannot exceed these income limits if you plan to qualify for a USDA loan. The USDA has a handy tool available to help you determine your income eligibility. 

Applicants are typically eligible if: 

• Adjusted household income is equal to or less than 15% of the area’s median income 
• Stable and dependable income 
• Ability to prove creditworthiness, typically with a credit score of at least 640 
• Demonstrate the willingness to meet credit obligations in a timely manner 
• Agree to occupy the dwelling as their primary residence 
• Have not been suspended or debarred from participation in federal programs 
• Purchase a property that meets all program criteria 

In addition to the eligibility requirements put in place by the USDA, certain lenders may have their own requirements and internal guidelines for eligible applicants. 

Along with the eligibility requirements placed on the applicant, USDA ‘Rural Development’ loans impose eligibility requirements on the location and property you plan to occupy. 

With the USDA ‘Rural Development’ loan, your home must be located in a rural area. Fortunately, the USDA’s definition of “rural” is liberal. Many small towns meet the “rural” requirements, as do suburbs and exurbs of most major U.S. cities. Conveniently, 97% of the geographical U.S. is USDA loan-eligible with only major metropolitan areas generally being excluded. 

To verify if the property you intend to purchase is an eligible location, the USDA has a handy tool to check eligible addresses. 

In addition to the “rural” location requirements, USDA applicants must purchase a home that meets the USDA loan property requirements. The main goal of the USDA ‘Rural Development’ loan is to enable homeownership by helping low-to-moderate-income households find a safe residence, either through a build, purchase, or refinance home loan. 

To help meet this goal, the USDA sets basic property requirements. These requirements include: 

• Must be located in a designated rural area, subject to the previously stated location and population requirements 
• Must be the primary residence 
• The property must have adequate utilities, including water and wastewater disposal 
• Must have direct access to a street, road, or driveway 
• The dwelling must be in safe working order 

Additional requirements are in place for both location and property eligibility.