The USDA Guaranteed Mortgage Program in Ohio enables home buyers to purchase a home with No Down Payment required.

Wait… the USDA? I thought they were about farming or food inspection.

They are. The USDA is the United States Department of Agriculture. This is the same Federal Government Agency that oversees the farming industry and inspects food safety.

Ok… then why does the USDA also have a Mortgage Program?

Well, another role of the USDA is to support the housing market with what they call Rural Development. The USDA has a mortgage program that does not require any down payment at all, as long as the home is located in a USDA eligible area. The key to being located in an eligible area is the United States Census statistics and what they classify as “Rural”. Generally, the census maps have a broad definition of Rural and we often see all areas outside of obvious metro areas given the rural classification. It is not surprising to see suburbs of major cities such as Columbus, Cleveland, and Cincinnati given a rural designation.

The USDA often refers to this program by two different names: the Rural Development Loan Program and the USDA Guaranteed Mortgage Program. These are two different names for the same program and you may see them used interchangeably. The word Guaranteed is used because the USDA does not lend the money to borrowers directly but they “Guarantee” the loan for lenders who offer this USDA mortgage product. This Guarantee enables mortgage lenders to issue USDA Mortgages to their borrowers with the knowledge that there is a safety net due to the backing of the federal government. The net result to borrowers is that they have available to them a mortgage program that has low fixed rates with no down payment requirement. There are other mortgage programs that have a somewhat similar set up. The FHA Mortgage program is also backed by the federal government. The FHA has no geographic requirements like the USDA, but FHA programs do require at least a 3.5% down payment. VA loans are also backed up by the government and they require no down payment as well but VA loans are only available to qualified military veterans.

The USDA also has another mortgage program that is known as the USDA Direct Program. USDA Direct Mortgages are only available for very low qualifying income levels. This program is offered “directly” through the USDA and is not available through lenders. The majority of Ohio home buyers are within an income range that would qualify for the USDA Guaranteed Mortgage Program.

How do I know if the home I want to purchase is an area the is eligible for the USDA Program?

Ohio has 88 Counties and 86 of these counties are either fully eligible or partially eligible for the USDA Mortgage Rural Development Program. The two adjacent counties of Cuyahoga and Summit are the only counties in the state of Ohio that are entirely ineligible for the USDA Program. Cuyahoga County contains the city of Cleveland and Summit County contains the city of Akron. These two metro areas connect and create a greater metropolitan area that runs along Interstate 77 starting at Lake Erie and running south all the way to Canton. This metro area covers all of two counties and spreads into several other counties as well.

The other major metro areas of Ohio such as Columbus, Cincinnati, and Toledo still have some eligible areas within their counties. Most counties in Ohio are either entirely eligible or just have small pockets of ineligibility around the largest town or city. Many areas that are suburban and not really “rural” are actually zoned as eligible for this program. As a rule of thumb, if you live outside of the immediate metropolitan area of any city, you may be eligible for the Rural Development USDA Mortgage Program.

To find out if your home or the home you want to buy is located in a USDA Eligible area, use the Search Box below and enter the name of your town. You can also check the Eligible Counties tab in the menu at the top of every page.

What about property condition? Can I buy a fixer upper?

The USDA isn’t the program for buying homes that need repair. The USDA Guaranteed Mortgage Program is tailored towards homes that are move in ready. In fact, the USDA will flag a home for certain repairs to be completed prior to closing.

Visit the Ohio USDA Mortgage Property Guidelines section to see if the home you wish to purchase meets the requirements.

What are the income requirements for the USDA Mortgage Program?

Income guidelines for USDA Mortgages are a little different than most mortgage programs. Like other programs, the USDA does require that you have enough verifiable income to qualify for the mortgage payment. The income requirement that makes the USDA program different than most mortgage programs is that they also have maximum incomes. Essentially, the USDA believes that if your income exceeds a certain amount, you should be required to bring some money to closing in the form of a down payment by using a different mortgage program such as FHA or a Conventional mortgage. The USDA Mortgage Program is intended for households that have what the government census data considers “Moderate Household Income”. This census data is compiled according to county median income levels.

Since the USDA Mortgage Program is so focused on income and property requirements at a county level, we have organized this website with an individual page for each county. Check your county under the Eligible Counties tab to show your local income requirements and area requirements for each county in Ohio.

Visit the Ohio USDA Mortgage Income Guidelines section and choose your County to see if your Household Income meets the USDA requirements.

Are there any minimum or maximum loan amounts with the USDA Mortgage Program?

There are no minimum or maximum loan amounts with the USDA Mortgage Program. Most lenders that offer USDA Guaranteed Mortgage Program have a minimum loan amount of $50,000. The USDA itself has no minimums or maximums.

What credit score do I need to qualify for a USDA Mortgage?

Most USDA approvals requires a 640 credit score, however an exception can be made for scores down to 620. This exception only has a chance if the housing history of the applicant can be documented. If the applicant currently owns a home with a mortgage than this would be based on the mortgage reporting history with the credit bureau. If the applicant is currently renting then rent would need to documented with cancelled checks or evidence of electronic payment for 12 consecutive months. The USDA Credit Guidelines do allow for a few minor lates on the credit but generally they want to see a credit report with no recent major delinquiencies.

Visit the Ohio USDA Mortgage Credit Guidelines section to learn more details about the credit criteria for buying a home.

Is the USDA Mortgage Program only for first time home buyers?

No, previous and current home owners can also use the USDA Mortgage Program.

One rule to keep in mind though is that the USDA does not allow any applicant to own more than one home at any one time. If you are a current home owner who is looking to buy a new home with the USDA Mortgage Program, then your current house must sell on or before you purchase your new home with the USDA program. Closing on the sale of a current residence on the same day as the purchase of a new home is common and can be coordinated.

Can the USDA Program also be used for refinancing my house?

Yes, but only if the current mortgage on the house is also a USDA mortgage.

Can the USDA Mortgage Program be used to purchase an Investment Property?

No, the program is only for the purchase of a primary residence. The USDA has you attest at closing that you plan on occupying the home as your primary residence for at least a year. You can eventually buy another primary residence down the road and keep your USDA home as an investment property. The new home purchase would need to be with a non-USDA program, since the USDA does not allow you to have two USDA mortgages at the same time.

Does buying a house with no down payment mean that I don’t need any money at closing?

There are always closing costs when buying a home in Ohio. These closing costs include Conveyance Fees, also known as Transfer Taxes, that are paid to the State and Local governments. There are also costs paid to the title insurance company, and payments made on property tax bills and homeowners insurance. Due to regional and local variances in Conveyance Fees, the exact amount of closing costs can vary based on a specific town and a specific house, but as a general rule of thumb, closing costs equate to about 5% of the home’s selling price. The USDA does allow the seller to pay up to 6% of the sales price towards the buyer’s closing costs. When the seller pays the closing costs of the buyer it is known as seller assistance. Usually, we find that the 6% seller assist is enough to cover the buyer’s closing costs.

If the seller does not agree to pay seller assist, then there is a way that the buyer can still have no money due at closing. USDA Mortgages also allow home buyers to include the closing costs into the loan amount. No other common mortgage program allows the buyer to finance their closing costs. The ability to finance any closing costs depends entirely on the value of the real estate appraisal.

Let’s say the home has a sales price of $150,000 and the amount of closing costs is $7000. In order to be allowed to finance all of these costs, the house would need to appraise for at least $157,000. In this example, if the house appraised for $155,000, then the maximum loan amount would be $155,000 and the cash due at closing would $2,000. Closing costs can also be covered in a combination of appraised value and seller assist. For instance, if the home appraises for $153,000, then $3,000 can be covered with the increased loan amount and the other $4,000 can be paid by the seller.

The fact that there are two options for covering closing costs results in most USDA purchases requiring no money due at the closing table.

Ohio USDA Loan Program

Key Items to Remember