Frequently Asked Questions

Feel free to browse through our list of frequently asked questions.  If you still can’t find what you’re looking for then ask us a question using the form at the bottom of this page and we’ll send you an email with our answer.  If you ask a personal question then we’ll keep it between us.  If we feel your question could help other people then we may add it to our list for the rest of the world to see.

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Are there property conditions that would disqualify a home from being eligible for USDA home financing?
Mar. 1, 2010
Yes, the home needs to meet a certain set of standards. For the most part, it needs to be habitable without violating any health and safety guidelines. Here's a few examples of items that would need to be fixed: Chipped & Peeling Paint, Broken Windows, Mold, Missing Kitchen & Bath Fixtures, No Flooring, Bad Roof, Missing or Defective Furnace.

Can I refinance our USDA mtge to a lower interest rate? We are currently at 5%. Who would do this refinance?
Jan. 31, 2013 by Jamie Starr, IN

Great question! USDA has a pilot refinance program specifically for Indiana and a few other states. There is no appraisal required and as long as your current with your existing mortgage payments we don't even have to credit qualify you again. We could refinance your current balance to a lower interest rate (approximately 3.75% today) and roll in the closing cost into your new loan. It's really a fantastic option that could save you a ton of interest. If you are interested in learning more about this you can complete an application at help.the2mortgageguys.com and we can work up some options for you.

Do you have to use a realtor when using a USDA loan?
May. 31, 2015
Not unless the home is listed with a REALTOR. In that event you could contact the seller's agent directly or contact an agent on your own to present them an offer. If the property is For Sale By Owner then you could negotiate directly with the seller. Your lender will only require a signed purchase agreement to process your loan application.

Does a "proposed construction" property qualify for a USDA loan?
May. 17, 2015 by Andrea, Centerville, IN
Yes, you can but a "new construction" property with a USDA loan. It cannot be used for a construction loan though, only to pay for a finalized property.

Does USDA loans require well water testing? If yes, what testing needs to be done? Can the buyer collect the water or does a third party need to collect the water?
Feb. 10, 2015 by Renee Bowser, Indiana/Grant County
USDA does not require water testing unless the appraiser calls for it. In the event we need a water test it must be completed by a certified inspector and cannot be done by the buyer or seller themselves.

How does my credit rating affect my ability to qualify for a USDA mortgage?
Mar. 1, 2010
USDA does not have a minimum credit score requirement. However, mortgage investors who offer USDA home financing will have minimum scores and you will need to qualify based on their minimum. At First Republic Mortgage, our investors are currently offering this to anyone above a 620 credit score.

I am looking to buy my first home and would like to get a usda loan but have student loans that are on hold for now. Can I still get a usda home loan?
Jul. 7, 2015 by danielle, indiana
The fact you have deferred student loans will not disqualify you from a USDA home loan. Depending on when your payments are scheduled to begin we would either use your future payments to qualify or a percentage of the loan amount to calculate a future payment. We will not ignore the deferred debts though so you would have to qualify with the loan payments.

Is an inspection REQUIRED before you close on a USDA home loan?
Oct. 4, 2014 by Amber Reynolds, Indiana
A home inspection is not required but it is recommended. USDA requires a FHA licensed appraiser appraise the home. They are determining value and making sure the home is safe and sound.

Is there a certain amount of years you must stay in a house if using a USDA loan?
Sep. 17, 2015
Nope! You're declaring that you intend to live in the home as your primary residence. There is no expectation/requirement for you to stay there for any specific duration.

Is there a limit to the amount of acreage that can be purchased if it has a home on it? Does it have to be zoned residential or can it be agricultural?
Sep. 10, 2015
This answer will vary from lender to lender since USDA doesn't have an official cap on acreage or zoning. We (LeaderOne Financial) are capped at 20 acreas but the majority of the value needs to come from the residence. Also, we'll need to get a few comps with excessive acreage as well (might be tough). As far as zoning, doesn't matter what the county calls it as long as the appraiser calls it residential. The home needs to be residential in nature, no income producing elements such as tillable acreage, stables, working barns, etc. I hope this helps better understand your question!

Me and my wife are looking at a house in a small town. Her credit score is at a 637 and mine at a 615. I have been working on fixing mine with paying a few things off. We are just under the guidlines for an FHA loan but have a hard time saving money for a down payment as well. We have 3 kids and found a house perfect for us. Is this type of loan easier to obtain with our situation. And will both of our credit scores matter our will an average be taken?
May. 5, 2015
USDA works very similar to FHA in the qualifying aspect. Credit score requirements are slightly stricter though. You would need a 640 mid score (middle credit score) to qualify with us based on today's guidelines. The rules are always changing though and some lenders might be willing to lend below that. Your best bet would be to contact us so we can complete an initial consultation, online application and work up a game plan for you.

My husband and I are currently living with my mom in Cincinnati, but we are looking for houses in southeast Indiana (Bright, Indiana specifically). I stumbled upon this website today and would like more information. I believe Bright is eligible, but I have more questions regarding borrower eligibility. We make about 60,000/year combined, we both have reasonable credit and some savings in the bank. Are there any other guidelines we need to know about before we apply for this type of loan? We want to make sure this is something we can apply for. Thank you for your help!
Jul. 9, 2014 by Katie, Cincinnati, OH
The property needs to be in an eligible location and your household income cannot exceed the county limits. Beyond that you need a 640 credit score, qualifying income and enough money to cover any closing costs and prepaid items not covered by the seller. Give us a call and we can work out the details.

My wife and I filed for bankruptcy almost 2 years ago now, so we know that until the 2 year mark, we can't get a loan. That being said, in August we will hit that date. We are currently in a home that we have been in a rent to own situation with the owner for some time. We have the purchase price negotiated, and it's probably below market value at this time. He has also allowed us 25% of the rent to go toward the purchase price, about 6% of the home purchase price at this time. My credit score is now north of 620, and climbing. We have little to no savings, as we have paid off several things, including credit cards and a few cars. Is this program something that could work for us? Would the 6% equity from rent be used for closing costs/could it. Or would it simply come off the purchase price, and then we would pay closing? Thanks Scott
Mar. 26, 2014 by scott ward, IN
Bankruptcy: In regards to your bk and the 2 year mark: FHA allows you to be 2 years pas the bankruptcy discharge date but USDA requires that you be 3 years. If you can come up with a 3.5% down payment you could consider FHA otherwise you might need to wait an additional year to qualify for USDA. There are other USDA requirements but without knowing more about your situation I can't say if you would otherwise qualify.

Credit Scores: 620 or higher is the requirements for us on FHA and VA loans. USDA still requires a 640 or higher. Either way, you're pretty darn close now and hopefully your score will be even higher by August.

Home Equity: The seller can credit you any portion of the rent they want but it has to come in the form of a discount on the sales price. You would still be required to come up with any down payment requirements depending on the loan. Even if you are buying the home for less than the appraised value we still can't use/view the equity.

I hope this helps. If you have any other questions just let me know and when you're ready get in touch and we can do our best to help you.


My wife and I have relatively good credit scores (700 and 760). We are interested in purchasing a house in a USDA eligible area. Unfortunately after paying off her student loans we have little left in savings. I realise that the USDA loans can have a 0% downpayment but what other upfront cost are there.
May. 4, 2012 by Eoghan Reade, IN
Sorry for the delay on answering this Eoghan. You are correct, there is no down payment requirement but you will have closing cost and prepaid items (money needed to set up your escrow account). USDA allows the seller to pay up to 6% of the sales price to cover your closing costs and prepaids. If you negotiate accordingly you won't have any out of pocket expenses. Here's the exception: You will more than likely have an earnest money deposit which you can get back at closing. You may have to pay for the appraisal when it's ordered. Home inspections are optional but will cost you at time of ordering. I hope this answers your question! Let us know if it's not too late to help.

The property i am interested in has a tank type septic system that is functioning properly, will this qualify for USDA?
Feb. 18, 2016 by Jerry Britt, In
Sorry Jerry, per USDA, tank septic systems are not allowed in Indiana.

We are looking at buying a home that needs some updating and needs both bathrooms fixed, roof and ac installed. They only want $120,000 for the house so we could spend up to 40,000 more for the items that need to be fixed. My husband makes about $70,000 and we both have excellent credit with a household of 6 people. Do we and the house qualify?
Jul. 12, 2016 by Bethany Geyman, Indiana
USDA does not allow you to finance improvements in addition to the sales price. We do offer a 203k renovation loan that would allow you to buy in and borrow the additional money to fix the bathrooms, roof, a/c, etc. You can learn more about the 203k program on our 203k website: http://indiana203kmortgages.com. If you think this is something that may work for you just let us know and we can get you pre-approved ahead of time.

We have a usda home loan and have had it for almost 6 years now and our family has grown and we are looking to get a bigger house. What are the rules of selling current home and re applying for a new home?
Jul. 16, 2015 by Erika Moore, IN
Great question Erika. You don't have to wait at all. You could possibly sell your current home and use USDA again. Depending on the amount of home equity you might find a different loan option works better. USDA does not require that you keep that mortgage for a predetermined time so if you've outgrown you home, let us know and we can help get you pre-approved for a new home.

What are the income limitations?
Mar. 1, 2010 by The 2 Mortgage Guys, Kokomo, Indiana
Income limitations are based on total household occupancy. In Indiana, the average maximum income is approximately $74,000. It does vary per county and you can check your eligibility by visiting USDA's eligibility page at http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp&NavKey=property@11

What does "without adequate housing" mean? My husband and I currently live in a small, 800 Sq ft, 2 bedroom house with our first child on the way. I bought the house with an FHA loan before we were married. I can't seem to find information on what "without adequate housing" means...
Dec. 25, 2014 by Cass, IN
Adequate Housing would mean you currently have a home that is safe and sound, not condemned or unlivable. It also means that you have a home that is sufficient size for your family. In your situation, a two bedroom home would be sufficient for a husband/wife and child. This is very much a gray area with USDA but in our experience it's really difficult to get USDA to grant an exception on owning multiple properties. You will need to sell your current home before you're eligible for a new home with USDA financing.

With a USDA Guaranteed Loan, is there PMI? I read that you do not have mortgage ins. with this type loan.
Jan. 30, 2014 by Linda
Linda, USDA used to offer a NO PMI loan but in recent years they changed it and now charge PMI. Since October 1, 2012, USDA mortgage insurance rates have been :

For purchases, 2.00% upfront fee paid at closing, based on the loan size
For refinances, 2.00% upfront fee paid at closing, based on the loan size
For all loans, 0.40% annual fee (monthly), based on the remaining principal balance

Even though USDA does require PMI insurance it is still much lower (one third) than FHA financing and there is no down payment requirement. If this is a program you would like to get a FREE pre-approval on just let us know.

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IMPORTANT:  If you ask a personal question then we’ll keep it between us.  If we feel your question could help other people then we may add it to our list for the rest of the world to see.

DISCLAIMER: Neither Indiana USDA Mortgages (IndianaUSDAmortgages.com) nor LeaderOne Financial Corporation is affiliated with any government agencies, including the USDA.