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USDA Home Loans in Pennsylvania

Home with for sale signThe USDA loan, also known as the USDA Rural Housing Loan Program is a 30 year fixed rate mortgage that is created for low to moderate income home buyers.

The house must be located in an USDA eligible area of Pennsylvania. The USDA mortgage loan does not require a down payment (100% financing plus the guarantee fee). The USDA home loan is a zero down mortgage program. Home buyers must meet the income limits for PA (see below). You can estimate the USDA loan amount and mortgage payment with the USDA calculator. The loan is "insured" by the United States Department of Agriculture.


USDA income limits for Pennsylvania

The income limits vary by the Pennsylvania and the metropolitan statistical area (MSA) and household size:

The standard 2020 Pennsylvania base income limits are:

1-4 member household : $90,300
5-8 member household : $119,200


There are county exceptions for higher incomes. See USDA income limits

Annual income includes all eligible (gross) income from all adult household
members, not just parties to the mortgage. The household income may be adjusted downward due to:

  • Care of Household Members with Disabilities
  • Child Care Expenses
  • Dependents
  • Elderly Household
  • Medical Expenses
The USDA provides extensive information on income determination in Chapter 9 of the SFH Guaranteed Loan Program Technical Handbook

USDA loans and credit score and credit history

For manually underwritten loans, the USDA requires a 640 "middle" credit score, although, there are exceptions:

Credit score less than 640

According to the USDA underwriting guidelines, underwriters (that's the approval person), must perform a cautious level of underwriting. A detailed review of all aspects of the applicant's credit history should be examined to establish the applicant's willingness to repay and ability to manage obligations as agreed. Unless there are extenuating circumstances documented in accordance with this Chapter 10, a credit score in this range is generally viewed as a strong indication that the applicant does not have an acceptable credit reputation.

Little or no credit history:

The lack of credit history on the credit report may be mitigated if the applicant can document a willingness to pay recurring debts through other acceptable means such as third party verifications or canceled checks. Due to impartiality issues, third party verifications from relatives of household members are not permissible. Lenders can develop a Non-Traditional Credit Report for applicants who do not have a credit score in accordance with Paragraph 10.6 of this Chapter

Indicators of unacceptable credit

The following indicators require documentation meeting the criteria of Section 10.8 to approve an applicant's loan request for manually underwritten loans:

• Foreclosure within 3 years:
Including pre-foreclosure activity, such as a pre-foreclosure sale or short sale
in the previous 3 years (refer to Attachment 10-B for additional guidance);

• Bankruptcy within 3 years:

• Chapter 7 bankruptcy discharged in the previous 3 years;

•  An elapsed period of less than 3 years, but not less than 12 months, may be acceptable if the applicant meets the criteria of Section 10.8 of this Chapter.

• Chapter 13 bankruptcy that has yet to complete repayment (repayment plan in progress) or has completed payment in the most recent 12 months.

• Plans that are completed for 12 months or greater do not require a credit exception in accordance with Section 10.8;

• Late mortgage payments if any mortgage trade line during the most recent 12
months shows 1 or more late payments of greater than 30 days.

• Late rent payments paid 30 or more days late within the last 12 months.

Read more about USDA credit requirements in Chapter 10 including bankruptcy, foreclosure and short sale acceptance

USDA qualifying areas

The home must be located in a USDA defined area. The USDA provides a lookup tool to determine whether the house is located in a USDA designated location. USDA area eligibility lookup

The property must be predominately residential in character, use, and design. The home may be attached, detached or semi-detached and must meet the current minimum USDA property guidelines.

Site size

There is no specified limitation to the acreage/size of the lot. A home with excessive acreage that represents a cost greater than a similar home with less acreage may not be acceptable. The appraiser must provide an addendum to the appraisal with an explanation to adjustments to comparable properties.

Income producing buildings

The property must not include buildings principally used for income-producing purposes. Barns, silos, commercial greenhouses, or livestock facilities used primarily for the production of agricultural, farming or commercial enterprise are ineligible. However, barns, silos, livestock facilities or greenhouses no longer in use for a commercial operation, which will be used for storage do not render the property ineligible.

Outbuildings such as storage sheds and non-commercial workshops are permitted if they are not used primarily for an income producing agricultural, farming or commercial enterprise. A minimal income-producing activity, such as maintaining a garden that generates a small amount of additional income, does not violate this requirement. Home-based operations such as childcare, product sales, or craft production that do not require specific commercial real estate features are not restricted. Additional property eligibility can be found in Chapter 12 Property And Appraisal Requirements

Chapter 12 also addresses potable and waste water systems, street access and road maintenance.

PHFA and USDA

The USDA loan program is accepted by the Pennsylvania Housing Finance Agency (PHFA) under the Keystone Government Loan Program. The benefit of the Keystone government loan is a lower interest rate and access to the Keystone Assistance Program (subject to PHFA guidelines). The maximum assistance loan is 4% of the sales price up to $6,000. There are no first time home buyer requirements with either the Keystone Government program or the Keystone Assistance program.

Rotating question mark  Frequently Asked Questions About USDA Home Loans

Q. Are there closing costs on a USDA loan?
A. There are closing costs with USDA home loans, however, there is no required down payment (100% financing) and the home seller is permitted to pay up to 6% of the buyer's closing costs

Q. Are USDA loans bad?
A. The USDA home loan is a good loan program, provided that you can meet the income and area requirements. There is an upfront funding fee of 1% and there is a monthly mortgage insurance expense. Unfortunately, the monthly mortgage insurance never falls off, even when the loan balance falls below 80% of the home value.

Q. Are USDA loans hard to close?
A. The USDA loans parallel the FHA loan guidelines. The time line for a USDA loan is about 30 to 45 days. The exact time period it takes to process a USDA loan is dependant on the applicant's preparedness and appraisal time line

Q. Are USDA loans strict?
A. The USDA loans follow the FHA guidelines. The USDA loans are a bit more restrictive than the conventional loan, but in general, they're not so rigid that the loan should be ignored.

Q. Are USDA loans worth it?
A. The USDA loan is actually a better choice than an FHA loan because the upfront mortgage insurance is less than an FHA loan and the monthly mortgage insurance premium is also lower. The substantial difference is the income and area requirements

Q. Can I buy a fixer upper with a USDA loan?
A. The USDA loan is not intended for minor or major renovation. The FHA 203(k) loan program should be used to purchase and rehabilitate a home.

Q. Do sellers like USDA loans?
A. I don't think home sellers have a clue about USDA loans. They usually take the advise of the real estate agent.

Q. Do you have to be a first time home buyer to get a USDA loan?
A. There is no first time home buyer requirement with USDA loans.

Q. Do you have to pay back a USDA loan?
A. Yes

Q. How do you check if a home is USDA approved?
A. See above