What Is a USDA Loan?

USDA loans are supported by the United States Department of Agriculture (USDA) and function as a specialized mortgage program aimed at facilitating homeownership in rural and select suburban areas. The USDA loan program has its roots in the Agricultural Credits Act of 1923, which aimed to provide credit to farmers struggling during the Great Depression. Over the years, the program evolved to address broader rural development needs, including access to housing.

It appeals to individuals and families seeking to purchase homes in these regions due to its unique benefits, including low to no down payment requirements, competitive interest rates, and flexible eligibility criteria. These loans offer an alternative path to homeownership for those in areas where traditional financing may be scarce or inaccessible. Essentially, USDA mortgages in NH provide low and moderate income individuals to buy a home while minimizing upfront costs. 

USDA Loan Requirements in New Hampshire

In this section, we delve into the general requirements for USDA loans in New Hampshire, focusing on key aspects such as income, residency, and location guidelines. By understanding these fundamental criteria, prospective home buyers can better assess their eligibility and take significant steps in their process towards homeownership in New Hampshire.

  • Residency Requirement: Applicants for USDA loans in New Hampshire must be either U.S. citizens or legal residents intending to use the purchased property as their primary residence. USDA loans cannot be used for investment properties or vacation homes.
  • Income Eligibility: USDA loans target individuals and families with moderate incomes. The USDA sets income limits based on the area and household size to ensure that the program benefits those who may face financial constraints in accessing traditional mortgage financing.
  • Location Guidelines: Eligible properties for USDA loans in New Hampshire must be located in designated rural or select suburban areas as determined by the USDA. Prospective buyers can verify property eligibility using the USDA’s online mapping tool or by consulting with a USDA-approved lender.

Pros and Cons of USDA Loans

Understanding the pros and cons of USDA loans will help you to better navigate the process when pursuing this type of financing. As an informed borrower, you can make decisions that ultimately align with your financial and home buying goals. 

Pros of USDA Loans 

  • Flexible Credit Requirements: While lenders may have their own credit score requirements, USDA loans generally have more lenient credit guidelines, allowing individuals with less-than-perfect credit histories to qualify. At Griffin Funding, you can qualify for a USDA home loan in NH with a credit score as low as 600. 
  • No Down Payment: USDA loans offer the advantage of requiring little to no down payment, making homeownership more accessible, particularly for those with limited savings.
  • Competitive Interest Rates: USDA loans often feature competitive interest rates compared to conventional mortgages, resulting in potential long-term savings for borrowers.
  • Income Flexibility: USDA loans can be an affordable option for individuals and families with low incomes, providing flexibility in income requirements to accommodate varying financial situations.
  • No Prepayment Penalties: With a USDA mortgage in NH, you don’t have to worry about facing any penalties if you pay off your mortgage ahead of schedule. USDA loans don’t carry any prepayment penalties, allowing you the flexibility to pay them off quicker and save on interest. 
  • No PMI Requirement: Conventional loans typically require borrowers to pay PMI if their down payment is below 20%, but USDA loan borrowers don’t have to pay PMI, regardless of their down payment amount. While USDA loan borrowers do have to pay a guarantee fee, this tends to be low when compared to PMI and other forms of mortgage insurance. 
  • Streamline refinance: Easily refinance your existing USDA mortgage to a lower rate (if available) without an appraisal, credit review, or income docs.

Cons of USDA Loans:

  • Location Restrictions: USDA loans are only available for properties located in designated rural or select suburban areas. This means that you won’t be able to use a USDA loan to purchase real estate in a major city or urban center.
  • Income Limits: Income limits for USDA loans are based on the median income for a given area. Borrowers’ adjusted income cannot exceed 115% of the median income in the area where they’re looking to buy. So, if you exceed the income limit in a given area, you’ll have to look elsewhere or consider a different home financing option. 
  • Guarantee Fee: USDA loans require a guarantee fee, which is a one-time upfront fee and an annual fee that adds to the overall cost of borrowing. The current guarantee fees are 1% upfront and .35% annually.
  • Property Eligibility Requirements: Properties must meet specific eligibility criteria set by the USDA, including being in designated rural or suburban areas and meeting certain quality standards, which may limit the pool of available homes for purchase. Additionally, USDA loans in NH can only be used to purchase a primary residence; vacation homes and investment properties are not eligible. 
  • Processing Time: Due to the USDA’s involvement in the loan approval process, USDA loans may take longer to process compared to conventional loans, leading to potential delays in closing.

How to Qualify for a USDA Loan in New Hampshire

To qualify for a USDA loan in New Hampshire, you’ll need to meet certain eligibility criteria set by both the USDA and the lender. Here are some key lender requirements:

  • Minimum Credit Score: In order to qualify for a USDA loan in NH with Griffin Funding, you’ll need to have a minimum FICO score of 600. Keep in mind, however, that a better credit score will likely lead to better rates and terms. 
  • Debt-to-Income (DTI) Ratio: Your DTI ratio is the ratio of your monthly debt payments to your gross monthly income. Most lenders prefer a DTI ratio below 41%, although some may accept higher ratios under certain circumstances.
  • Stable Income: Lenders will assess your income stability to ensure you can afford the mortgage payments. Generally, you’ll need at least two years of stable employment or income.
  • Time Since Bankruptcy or Foreclosure: Typically, lenders prefer that at least three years have passed since a bankruptcy or foreclosure. However, there may be exceptions depending on the circumstances and the lender’s policies.

No matter what your situation is, the team at Griffin Funding can work with you to find the right home financing option for your needs. Partner with a leading USDA lender in NH to begin your home buying journey. 

Apply for a USDA Home Loan in New Hampshire

Securing a USDA home loan in New Hampshire involves meeting specific eligibility criteria, including minimum credit scores, debt-to-income ratios, stable income history, and adherence to USDA income limits. Partnering with a reputable USDA lender in NH is crucial to navigating the process smoothly.

Griffin Funding stands out as a trusted lender that specializes in USDA loans, offering personalized guidance and competitive rates to help prospective homeowners achieve their dreams of homeownership in New Hampshire. With Griffin Funding’s expertise and dedication, you can confidently apply for a USDA home loan, knowing you’re in capable hands.

Moreover, Griffin Funding’s innovative Griffin Gold app provides a convenient platform for tracking your loan application progress, comparing financing options, and managing your finances as you prepare to buy a home. Take the first step towards becoming a homeowner in New Hampshire by applying for a USDA loan in NH today.