To be eligible for a USDA loan, there are certain requirements that must be met.
For instance, because the USDA Home Loan Program was designed to help moderate- to low-income families and individuals secure a mortgage, there are designed income limits that vary for each USDA qualified area. These income limits are generally 115 percent of the average median income for that area. Borrowers must also be U.S. citizens, or legally permitted to be in the United States.
The home needs to be located in a rural area, as well. Fortunately, around 97 percent of the United States is designated rural for purposes of the loan, so many properties do qualify. Borrowers are often surprised when they discover that in many cases USDA rural areas can be suburbs on the outskirts of larger cities, or small towns with less than 25,000 residents.
As aforementioned, credit history doesn’t play as much of a role in the approval process as it does for other mortgage financing options, but the stronger the credit score, the better. Having a healthy credit score is always a plus, whether applying for a USDA loan or any other type of loan, mortgage, or otherwise.
Lastly, USDA loans can only be used to help borrowers purchase a property that will be used as their primary residence. Applicants interested in buying an investment property or vacation home, for instance, would not qualify.
