USDA Home Loans in Pennsylvania

House for saleThe USDA loan, commonly known as the USDA Rural Housing Loan Program, is a 30-year fixed-rate mortgage designed for first-time home purchasers with low to moderate incomes.

The property must be located in a USDA-approved area of Pennsylvania. The USDA mortgage loan does not need a down payment (100 percent financing plus the guarantee fee). The USDA loan is a zero-down payment mortgage program. Homebuyers must meet the income requirements of the PA (see below). The United States Department of Agriculture "insures" the loan. You can use this calculator to determine the USDA loan amount and mortgage payment. USDA calculator

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 qualifying (gross) income from all adult household members, not only mortgage holders. The family income may be reduced as a result of:

  • 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

The USDA needs a 640 "middle" credit score for manually underwritten loans, but there are several exceptions:

Credit score less than 640

Underwriters (the approval person) must conduct a cautious level of underwriting, according to USDA underwriting standards. A thorough examination of all elements of the applicant's credit history should be conducted in order to determine the applicant's desire to repay and capacity to handle commitments as agreed. A credit score in this range is usually seen as a strong indicator that the applicant does not have an acceptable credit reputation, unless mitigating circumstances are proven in line with this Chapter 10.

Little or no credit history:

If the applicant can demonstrate a desire to meet repeated obligations via other permissible methods, such as third-party verifications or canceled checks, the applicant's lack of credit history on the credit report may be mitigated. Third-party verifications from relatives of household members are not permitted due to concerns regarding impartiality.

Lenders may generate a Non-Traditional Credit Report for applicants who do not have a credit score, in accordance with Section 10.6 of this Chapter.

Credit indicators that are too high.
To approve an applicant's loan request for manually underwritten loans, the following indicators need paperwork that satisfies the Section 10.8 requirements:

• Foreclosure within three years: This includes any pre-foreclosure activity, such as a pre-foreclosure sale or short sale, that occurred during the previous three years (see to Attachment 10-B for further information).

• Insolvency within the next three years:

• a Chapter 7 bankruptcy dismissed during the previous three years;

• If the applicant meets the criteria outlined in Section 10.8 of this Chapter, an elapsed period of less than three years but no less than twelve months may be approved.

• Chapter 13 bankruptcy that has not yet completed repayment (repayment plan in progress) or has completed payment within the past 12 months.

• Plans that are carried out for a period of 12 months or longer do not need a credit exemption under Section 10.8.

• Late mortgage payments if any mortgage trade line has had 1 or more 30-day late payments in the previous 12 months.

• Rent payments that were 30 days or more late in the preceding year.

More information regarding USDA credit criteria may be found in  Chapter 10 including bankruptcy, foreclosure, and short sale acceptance

USDA qualifying areas

The house must be in a USDA-designated region. The USDA offers a search tool to check if the home is in a USDA designated area. USDA area eligibility lookup

The property's character, use, and design must be mostly residential. The home may be attached, detached, or semi-detached, and it must meet current USDA property requirements.

Site size

There are no restrictions on the acreage/size of the property. A house with excessive acreage that costs more than a comparable property with less land may not be acceptable. The appraiser must provide an addendum to the appraisal explaining the changes to similar properties.

Income producing buildings

Buildings that are primarily utilized to generate income are not permitted on the property.

Barns, silos, commercial greenhouses, or livestock facilities utilized mainly for agricultural, farming, or commercial business production are not eligible.

Barns, silos, livestock facilities, or greenhouses that are no longer utilized for a commercial business and will be used for storage, on the other hand, are not disqualified.

Outbuildings such as storage sheds and non-commercial workshops are allowed as long as they are not used mainly for income-generating agricultural, farming, or commercial activities.

This criterion is not violated by a little revenue-generating activity, such as tending to a garden for a modest amount of extra money.

Home-based businesses that do not need specific commercial real estate characteristics include daycare, product sales, and craft manufacturing. More information about property eligibility may be found here. in Chapter 12 Property And Appraisal Requirements

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

PHFA and USDA

Under the Keystone Government Loan Program, the USDA loan program is approved by the Pennsylvania Housing Finance Agency (PHFA).
The Keystone government loan has the advantage of a reduced interest rate and access to the Keystone Assistance Program (subject to PHFA guidelines).
The maximum aid loan is 4% of the sales price, up to a maximum of $6,000.
Neither the Keystone Government nor the Keystone Assistance programs have any restrictions for first-time home buyers.

USDA Home Loan Frequently Asked Questions

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 dependent on the applicant's preparedness and appraisal timeline

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