Step 1: Check If the Property Qualifies

• Location is everything. The property must be in a USDA-eligible rural or suburban area.
• Use the USDA’s official property eligibility map to check:
• https://eligibility.sc.egov.usda.gov

Step 2: Understand Income Limits

• USDA loans are designed for low to moderate-income households.
• Your household income must not exceed 115% of the area median income (AMI) for the county you're buying in.
• Include all adults’ income in the household, even if they are not on the loan.
• You can deduct certain expenses like childcare, dependents, or medical costs to help qualify.

Step 3: Meet the Credit Score Requirements

• Most USDA lenders require a minimum credit score of 640 for automated underwriting.
• A score below 640 and down to a 550 may still be eligible with manual underwriting, but you'll need:
  • Strong compensating factors (savings, low DTI, solid rental history)
  • No recent bankruptcies, foreclosures, or major derogatory accounts

Step 4: Verify Employment & Income Stability

• You need a stable job history, typically with 2 years in the same field.
• Self-employed? You’ll need 2 years of tax returns.
• Commission-based income? Prove 2-year history with consistency.

Step 5: Manage Your Debt-to-Income Ratio (DTI)

• The preferred max DTI is:
  • 29% front-end (housing)
  • 41% back-end (total debts including housing)
• Higher DTI ratios may still be approved with strong credit, cash reserves, or low payment shock.

Step 6: Make Sure You’re a U.S. Citizen or Legal Resident

• You must be:
  • A U.S. citizen, permanent resident, or qualified alien with proper documentation.

Step 7: Confirm You Don’t Already Own a Suitable Home

• USDA loans are for primary residences only.
• You generally can’t own another home that meets your needs unless it’s:
  • Too far from your job
  • Not safe or sound
  • Too small for your family size

Step 8: Prepare for the Appraisal

• The home must meet USDA property condition guidelines (similar to FHA):
  • No safety hazards
  • Functioning systems (roof, heat, plumbing, etc.)
  • No major structural damage

Step 9: Budget for Upfront Costs (Even With 0% Down)

• USDA loans have 0% down payment, but you’ll still need:
  • Closing costs- between 3-5% of purchase price (can be covered by seller concessions or rolled into loan)
  • Home inspection fees (recommended, but not required)
  • Reserve savings (not required, but helpful for approval)

Step 10: Choose a USDA-Approved Lender

• Not all lenders offer USDA loans.
• Pick one that understands the USDA process and can walk you through a pre-approval like me!!

Bonus Tips:

• Use seller concessions (up to 6%) to cover closing costs or buy down the interest rate.
• Don’t open new credit accounts or make large purchases during the loan process.
• If your credit is close, get a free analysis from a lender to improve your chances.