Everything You Need to Know About Oklahoma USDA Loan Requirements

Buying a home is one of the biggest financial decisions you can make. For many homebuyers, getting a mortgage through the USDA can be an attractive option thanks to the low interest rates and no down payment requirements. However, these loans do come with specific eligibility criteria you need to meet.

In this comprehensive guide, we’ll walk through all the key Oklahoma USDA loan requirements so you can determine if you qualify for this special rural housing program.

An Overview of USDA Loans

USDA home loans are mortgages guaranteed by the United States Department of Agriculture Rural Development department, They offer significant benefits like

• 100% financing – No down payment required
• Low interest rates
• Low monthly mortgage insurance
• Low or no closing costs
• No first-time homebuyer requirement
• More relaxed credit score requirements

In exchange for these perks, there are a few caveats. The eligibility criteria ensure these loans really do benefit low- to moderate-income buyers in small town and rural areas.

Let’s look at the most important criteria point-by-point:

Oklahoma USDA Income Limits

One of the top requirements is meeting the income eligibility guidelines for your county in Oklahoma The USDA publishes maximum income limits each year based on the median income in your area

Here are the income brackets for USDA loans in Oklahoma:

• Very low income – Below 50% of the median income
• Low income – 50-80% of the median income
• Moderate income – 80-115% of median income

For example, the median income in Oklahoma County is $71,300 for a family of four. Therefore, the brackets would be:

• Very low income – Below $35,650
• Low income – $35,650 to $57,040
• Moderate income – $57,040 to $82,095

The USDA uses your adjusted gross income, not your take-home pay, to determine eligibility. They’ll look at your W-2s, paystubs, and tax returns for proof of income.

In some cases, they may allow you to deduct certain expenses like childcare costs and disability payments. This can potentially bump up the amount of home loan you qualify for.

Buying a Home in a Qualified Rural Area

In addition to meeting income limits, your home needs to be in an eligible rural area to get a USDA mortgage.

The property can be:

• Inside a rural community with a population under 35,000
• In an urban area near a rural community
• Inside designated rural census tracts in larger towns and cities

You can verify whether a home is in a rural zone by looking it up on the USDA’s Property Eligibility Site. Just enter the property address and it will let you know if it qualifies.

About 97% of Oklahoma’s geography is eligible for USDA home loans. Generally, the main metro areas around Oklahoma City and Tulsa are excluded. Smaller cities and most rural counties qualify.

Credit Score Minimums

The USDA has more flexible credit standards than conventional mortgages. They’ll accept scores as low as 580 with a manual underwriting review.

Most lenders prefer to see at least a 620 FICO score to streamline the approval process. But the USDA will manually review lower scores case-by-case.

They’ll look at your full credit report to evaluate your payment history, balances, recent activity, and explanations for issues like medical collections or student loans. So it is possible to get approved with poor or fair credit, especially with good compensating factors.

Low Debt-to-Income Ratio

While credit score is important, your debt-to-income ratio (DTI) may be an even bigger factor. The USDA wants to ensure your total monthly debts are not excessive relative to your income.

Your DTI includes:

• Proposed mortgage payment
• Minimum credit card payments
• Auto, student, and personal loans
• Alimony, child support, garnishments
• Other debts and obligations

Divided by your gross monthly income.

The USDA usually caps your DTI around 29% on the front end and 41% on the back end. But they may go up to 32%/44% with strong compensating factors like solid assets, reserves, equity, and credit history.

Having a lower DTI definitely helps your chances of approval if you have blemishes on your credit or income near the limits.

Have a Steady Income Source

Having stable employment and income sources is key. The USDA wants to see you’ve had reliable jobs and income for the past 2 years with the ability to continue.

Self-employed borrowers need to provide documentation like tax returns and financial statements. Retirees can use retirement and social security income. Disability payments also count.

But income needs to be consistent, verifiable, and likely to continue for the foreseeable future.

Attend Homebuyer Education

First-time homebuyers with a USDA loan generally need to complete an approved homeownership education course. Thankfully many lenders offer online classes that only take a few hours to complete.

The training covers important topics like budgeting, shopping for a home, maintaining your home, and more. You’ll receive a certificate upon completing the class.

Cash Reserve Requirements

The USDA does not require a specific amount of cash reserves after closing. However, most lenders like to see 1-2 months of mortgage payments available in your accounts.

Reserves help protect against late payments if you face a temporary financial hardship like job loss or illness. Even a small cushion of savings can make approval more likely.

Follow the Home Requirements

The USDA has a few other requirements related to the condition and cost of the home itself:

• Home must be modest in size and design for the area.
• Home must be your primary residence where you live most of the year.
• Costs for any optional construction must be reasonable.
• Home must be located on a permanent foundation.
• Home must be structurally sound and meet HUD minimum property standards.
• The property must not be used for any income-producing activities, like a farm or rental unit.

An appraiser will complete an evaluation to verify the home meets all these guidelines before your loan can be approved.

Check Additional Requirements From Your Lender

This covers the core eligibility criteria straight from the USDA program guides. However, lenders can add their own overlays and restrictions.

For example, some smaller lenders only operate in certain states or counties. Large national lenders tend to have broader coverage areas.

Your lender might also require:

• Higher credit scores than the USDA minimums
• More cash reserves post-closing
• Lower debt-to-income ratios
• Less complex income sources

So before you apply, check with the lender to learn about any additional requirements beyond the USDA guidelines. This can prevent frustration from getting denied later.

Work With an Experienced USDA Lender

Navigating rural housing loans can be complex. Having the right lender on your side is critical. You want an experienced team familiar with USDA loans who can walk you through the process.

Many smaller local and regional lenders offer USDA loans with great customer service. Just be sure to ask about their experience and portfolio of these loans.

The bottom line is finding a lender who you trust to guide you and provide hands-on support from application to closing. It takes much of the headache and uncertainty out of the equation.

USDA Loans Can Open the Door to Homeownership

The road to buying a home is paved with many hurdles. From saving up a down payment to qualifying for a mortgage, it’s easy to see why purchasing a property seems out of reach to many buyers.

Thankfully, programs like the USDA’s home loans exist to help creditworthy borrowers in rural locales achieve the dream of homeownership.

While USDA mortgages do have eligibility requirements to qualify, they offer a much more accessible path thanks to perks like:

• Zero down payment required
• Below-market interest rates
• Relaxed credit score guidelines
• Lower monthly mortgage insurance

If you’re income-eligible and purchasing a home in a qualified rural area, a USDA loan can help make buying a nice, modest home a reality. Just be sure to connect with an approved USDA lender who can guide you through the mortgage process.