USDA Loan Requirements 2024

To qualify for a USDA mortgage loan, the property must be in an eligible location. Generally, any address that’s not in a large city or a densely populated suburban area can qualify for the loan. Surprisingly, 97% of U.S. land is in an eligible region. You can easily find out whether your property is in an approved area using an interactive map. 

The USDA defines eligible locations as “rural areas,” even if they don’t seem that rural. Within those regions, there are tiered income levels with varied population limits. 

For example, areas with populations of 10,000 or less are automatically eligible. For populations between 10,001 and 20,000, the property cannot be in a major statistical area.  

For populations between 20,001 and the upper limit of 35,000 to qualify, the area must have prior status as a rural zone according to the 1990, 2000, or 2010 censuses; it must also retain its “rural character.” 

In addition, areas with populations between 10,001 and 35,000 must usually demonstrate a shortage of approved mortgages for low- and middle-income residents. Even then, the USDA retains the right of final decision as to its eligibility. 

Annual income is a key deciding factor in determining USDA loan amounts. The potential borrower must have a consistent record of stable income and a good credit history. The household’s annual income must be held to 115% of the area in which the eligible house is located. 

The guaranteed loan program has a few conditional income standards regarding zip code and household size. You can consult the USDA’s eligibility tool to find out whether your home and household size qualify.  

Be aware that the USDA counts all the income your household generates. If you work in a medical office and you have an 18-year-old child who works in food service, both of your incomes are considered for the loan. 

In the direct loan program, the income threshold is drastically low, depending on state limits and regulations. You can find out your state’s upper loan limits with another interactive USDA map.  

The USDA does not have an established credit score for taking out a loan. However, the lending agencies do have a floor of 620. Some lenders might require a minimum of 640, as that score triggers streamlined credit analysis from the USDA’s Guaranteed Underwriting System. 

If your credit score is lower than 620, you may still have a chance to get a USDA Direct Loan. In this case, the USDA may want to offset the credit score with a low debt-to-income ratio, a sizable savings account, or other factors that limit their risk exposure. 

Your debt-to-income ratio is a measure of how much of your income goes to monthly bill payments and how much is left over. These bills include mortgage payments, car or student loans, credit card minimum payments, and other loan payments. These bills are all added together to represent your monthly gross income. 

The DTI ratio is determined when you divide your monthly debt by your gross monthly income. The result is then multiplied by 100 to reflect that data as a percentage — that’s your DTI ratio. 

Lenders like to see lower DTI ratios. They demonstrate your ability to pay bills yet still have ample money left over for living expenses. Normally, a DTI ratio of 36% or less is considered “good,” and a ratio between 36% and 43% is deemed “moderate.” A DTI ratio higher than 43% may require higher scrutiny by the lender. 

The loan limit on a USDA direct mortgage is the maximum amount of cash a homeowner can borrow. Acceptable limits vary by county and hinge on whether you get a direct or guaranteed loan. USDA guaranteed mortgages do not have a maximum defined loan limit. 

As of March 2024, most of the rural areas USDA guaranteed loans cover have a standard limit of $398,600. Higher-cost counties have higher limits between $431,400 and $919,800.  

Some counties are so high cost or densely populated that standard USDA loans aren’t available. You can consult the USDA’s Loan Eligibility Map to see your county’s loan limits.