The USDA mortgage loan is one of the very best loan products currently available for Tennessee first time home buyers. A USDA loan will offer a qualified home buyer 100% financing with no down payment, low fix interest rates, and low monthly mortgage insurance.
Requirements for a USDA loan are pretty easy. Applicants financing 100% should have a middle credit score of 620, preferably with no late payments or collections in the last year. Slightly lower credit scores can be excepted for buyers putting 3%-5% down payment.
Your debt ratio which looks at how much money you earn compared to how much money you spend each month needs to be in line with USDA requirements, however there is some flexibility in these ratios with higher FICO credit scores.
USDA also has household income limits, meaning that you can actually earn too much money to qualify for the loan program. The 2024 income limit works on a sliding scale in accordance with how many people live in the household and the property county. USDA loans are intended for applicants who want to purchase in a more Rural location, but don’t let the word “Rural” fool you as many suburbs just outside of Nashville, Memphis, Jackson, Knoxville, etc. likely have USDA eligible locations. Let’s look now that the latest Tennessee USDA Home Loan Guide
Tennessee USDA 100% Mortgage:
There are two basic USDA loans used to purchase homes in rural areas in Tennessee. Those are the Direct and Guaranteed loans. The Direct loans are completed by working directly with the regional USDA office assigned to the area you are working to purchase a home in. the Guaranteed program is offered by approved, third-party lenders and banks who process and service the loans.
Both loans are only for use for homes that are located in areas termed rural and both have specific income limitations based on the family size and county median income limits. To verify home qualifications based on location and income limits, you can visit USDA’s website to review eligibility.
At http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do anyone can input the data for a specific home or specific income scenario to find out if you meet the basic guidelines. USDA guidelines for credit and property appraisal are very similar to those used to qualify for FHA home loans. Borrowers must reflect an ability to repay based on credit history, and homes must be generally in safe living conditions.
BENEFITS OF USDA LOANS:
- 100% financing available, no down payment required
- Buyers finance USDA’s 1% upfront funding fee into the loan
- The lowest monthly MI (mortgage insurance) requirement compared to other products like FHA
- The property must meet minimal standards regarding safety and livability
- The property seller can be anyone. The property does not need a specialist USDA approval, the home just has to be located in an approved AREA
- All closing costs can be paid by sellers or financed into the loan depending on the appraised value
- USDA allows lenders to offer great terms without requiring exceptional credit
- 30 year fixed rate terms, with no prepayment penalties. Sell or move anytime without penalty
- Please note financing on mobile, manufactured homes, and vacant land is not permitted
USDA also offers some fantastic refinance options for Tennessee homeowners that already have a USDA loan.
USDA STREAMLINE ASSIST REFINANCE:
- Can be completed without new appraisal or home inspection
- Can be completed with limited documentation
- Must meet tangible benefits for client-assures refinance makes financial sense
- Available only to current USDA loan holders
- Timely mortgage payment history over the previous 12 months required
- Current USDA household income limits apply
- Learn more about USDA Rural refinance here
Homebuyers that have questions can contact us by submitting the short info request form on this page. We are available to assist buyers nationwide, 7 days a week.