Frequently Asked Question: How Much Can I Borrow With A USDA Rural Development Home Loan?
Q: How much can I borrow with a USDA Rural Development Home Loan here on Cape Cod?
A: With a USDA Rural Development Home Loan, you can buy a home with no money down. There is not a set maximum loan size; however, the amount you can borrow for a USDA Rural Development Home Loan depends on your monthly income and debt payments as well as the appraised value of the home you are buying.
To qualify for a USDA Rural Development Home Loan, your total household income can not exceed 115 percent of the Area Median Family Income. In addition, the address of the property must also qualify.
Your monthly USDA Rural Development Home Loan mortgage payment (which includes principal and interest as well as escrows for taxes and insurance) can not exceed 29% of your gross monthly income. Your total monthly debt obligations including the mortgage payment can not exceed 41% of your monthly income. The total debt ratio can go higher if there are compensating factors such as high credit scores or a large cash reserve. However, the maximum debt ratio can not exceed 45% of your monthly income.
These ratios are used to determine the maximum USDA Rural Development Home Loan amount that you can qualify for. For a given mortgage amount, the monthly mortgage payment on a USDA Rural Development Home Loan with no money down is less than an FHA mortgage with 3.5% down because unlike FHA mortgage, there is no monthly mortgage insurance premiums.
See a comparison between a conventional mortgage, an FHA mortgage and a USDA mortgage here.
To find out how much you qualify for, click on my free purchase assistant.
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