Everything You Need to Know About PA USDA Loan Requirements

Buying a home is an exciting milestone, but qualifying for a mortgage can be challenging, especially for low- to moderate-income homebuyers Fortunately, PA USDA loans are an attractive option that make homeownership possible even with limited savings or imperfect credit. In this comprehensive guide, we’ll break down all the key PA USDA loan requirements so you can determine if this special mortgage program is right for you

What Are PA USDA Loans?

PA USDA loans, also known as USDA Rural Development loans, are government-backed mortgages with very flexible qualifications. They require no down payment and allow higher debt-to-income ratios than conventional loans.

The United States Department of Agriculture (USDA) partners with private lenders to offer these mortgages to low- and moderate-income buyers in rural and suburban areas of Pennsylvania The program’s purpose is to promote homeownership and revitalize rural communities

PA USDA Loan Benefits

Here are some of the biggest advantages of PA USDA loans

• No down payment required – You can finance 100% of the purchase price plus closing costs
• Lower credit score requirements – Minimum 620 FICO score
• Higher DTI allowed – Up to 41% debt-to-income ratio
• 30-year fixed rates – Predictable payments that don’t increase over time
• Low mortgage insurance – Just 1% upfront guarantee fee
• No income limits – Only location eligibility requirements

PA USDA loans provide flexible approval guidelines so more buyers can achieve homeownership. They’re an excellent option if you don’t have much cash saved for a down payment or closing costs.

PA USDA Loan Requirements

While PA USDA loans are more lenient than conventional mortgages, you still need to meet certain eligibility criteria. Here are the key requirements:

Location Requirements

The home you purchase must be located in an eligible rural or suburban area of Pennsylvania. The USDA has designated certain locations outside of big cities as rural or “non-urban” even if they wouldn’t typically be considered rural.

You can easily check a specific address by using the USDA’s eligibility map tool. Generally, homes outside of Philadelphia and Pittsburgh’s urban cores are eligible.

Property Requirements

• Single-family home, townhome, or condo
• Primary residence only
• Move-in ready condition
• Appraisal showing home value supports loan amount

Borrower Requirements

• Minimum 620 credit score
• Stable income to cover mortgage payments
• Total debt-to-income ratio up to 41%
• Sufficient credit history

Keep in mind there are no specific income limits to qualify. Your income just has to be enough to comfortably handle the mortgage payment and other monthly debts.

First-Time Homebuyer Not Required

You don’t have to be a first-time buyer to qualify for a PA USDA loan. The program is open to anyone who meets the property and borrower requirements.

If you currently own a home, you would need to sell it before closing on the USDA-financed property.

Homebuyer Education Not Required

Some mortgage programs require you to complete a homebuyer education course prior to approval. However, this is not a mandate of the PA USDA loan program. Taking a course is optional.

How to Apply for a PA USDA Loan

Applying for a PA USDA loan involves these key steps:

1. Check your eligibility. Make sure the home is in an eligible location and you meet the credit, income and other requirements.

2. Find a USDA-approved lender. Many lenders offer USDA loans, but always verify they are approved with the USDA.

3. Submit loan application and documents. Your lender will let you know what documents, bank statements, tax returns and other info is needed.

4. Get pre-approved. The lender will issue a pre-approval letter once they review your application. This shows sellers you are a qualified buyer.

5. Make an offer. Your real estate agent can help you submit an offer once you are pre-approved.

6. Complete underwriting. The final step is the lender’s full underwriting to confirm your eligibility so you can move forward to closing.

It’s a good idea to get pre-qualified before you make an offer, so you know the loan amount and monthly payments you can afford.

PA USDA loans are easier to qualify for than conventional mortgages, but it still pays off to have a strong credit score and financial profile. This will make the application and approval process much smoother.

PA USDA Loan Credit Score Requirements

As mentioned above, the minimum credit score to qualify for a PA USDA loan is 620. But the higher your score, the better your interest rate will be. Here are the general credit score tiers for USDA loans:

• 760+ credit score – Qualifies you for the very best USDA interest rates
• 720-759 credit score – Gets you a low rate in the range of current market averages
• 680-719 credit score – Still considered good credit for decent rate offers
• 640-679 credit score – May have higher rate but still eligible
• 620-639 credit score – Minimum score allowed but leads to higher rates

With a 620 FICO score, you can qualify for a PA USDA loan, but your interest rate will be higher than buyers with scores of 680 or above. Aim for the highest score possible to maximize your rate savings.

PA USDA Loan Debt-to-Income Ratio

Your debt-to-income ratio (DTI) compares your total monthly debt payments to your gross monthly income. Conventional mortgages usually require a maximum DTI of 36%. But PA USDA loans allow a higher DTI of up to 41%.

This more flexible DTI helps buyers qualify who have higher student loan, auto, credit card or other monthly payments. Make sure to still limit your DTI as much as possible, because the lower it is, the more affordable your mortgage.

PA USDA Loan Income Requirements

PA USDA loans are unique because they do not have maximum income limits like other government-backed mortgages. You don’t have to be under a certain income threshold to qualify.

Of course, your income does have to be sufficient to support the mortgage payment and other obligations. And your DTI cannot exceed 41%. But there is no cap on the actual dollar amount of your earnings.

The program just requires you have stable income documentation from sources like:

• Employment wages
• Self-employment
• Social Security
• Disability
• Alimony
• Investment dividends

So no matter whether your household earns $50,000 a year or over $200,000, you can qualify as long as you meet the DTI requirements. The focus is on your ability to reliably make the monthly mortgage payment.

PA USDA Loan Limits

PA USDA loans don’t have maximum loan limits. You can finance up to 100% of the home’s appraised value, with no cap. Of course, the property has to appraise at or higher than the purchase price for full financing.

On the low end, some lenders do impose their own minimum loan amounts for USDA loans. Often it’s around $60,000 to $75,000. But the USDA itself does not set a minimum loan amount ceiling.

The appraisal determines what price and loan amount make sense for the individual property and market conditions.

PA USDA Loan Down Payment

One of the biggest advantages of PA USDA loans is that no down payment is required. You can truly purchase a home with 100% financing.

On a $200,000 home purchase, a 3% down payment would normally be $6,000. But with a USDA loan, you pay $0 down.

This makes the program extremely affordable for eligible buyers who have minimal cash savings but can still comfortably handle the monthly mortgage payments.

Can You Pay Down Payment with PA USDA Loan?

Since zero down payment is required, can you still put money down if you want to? Yes, it’s absolutely optional for borrowers to make a down payment with a PA USDA loan.

The main reasons to consider a down payment are:

• Reduce the loan amount and monthly payments
• Build immediate home equity
• Potentially reduce interest rate

There’s no mandatory down payment, but paying one comes with some advantages if you have the savings.

PA USDA Loan Closing Costs

Closing costs are the fees charged to process and finalize your mortgage. For buyers without much savings, PA USDA loans make closing costs affordable in two ways:

1. Seller credits – The seller can cover up to 6% of the purchase price to pay for your closing costs.

2. Financing – Any remaining closing costs can be rolled into the mortgage loan amount.

So if you’re a first-time homebuyer with minimal funds, PA USDA loans allow you to buy a home with $0 out of pocket at closing.

Common PA USDA