Am I Eligible for a USDA Loan in the State of Maine?

From dense forests to scenic coastline, majestic mountains to charming communities, Maine truly offers the best of everything. And, with the USDA home loan program, it’s affordable to buy a home in the state of Maine, too.

USDA loans have become a popular option for home buyers because they’re less expensive than other loan types, with 100 percent financing, no down payment required and low private mortgage insurance rates. Although the USDA home loan program does come with certain eligibility requirements, it’s less restrictive than most other loan programs.

Read on to learn more about the eligibility requirements for USDA loans in Maine and to find out whether you qualify.

Basic Requirements

As with most home loan programs, there are a few basic requirements you must meet in order to be eligible for a USDA loan, including the following:

• You must have U.S. citizenship or permanent residency.
• You must have a dependable income for a minimum of 24 months.
• You must be able to make a monthly payment — which includes principal, interest, insurance and taxes — that is 29 percent or less of your monthly income.
• Your total monthly debt payments cannot exceed 41 percent of your income.
• You must have an acceptable credit history, with no accounts converted to collections within the past 12 months.

USDA Credit Requirements

According to the USDA, to be eligible for a guaranteed loan, “an applicant must have a credit history that demonstrates that they are reasonably able and willing to repay the loans and meet obligations.”

Potential borrowers must submit a credit report to the lender, which the lender will carefully review. The lender will investigate any derogatory marks on your credit history to ensure that all of the information presented is accurate. The lender will consider any possible explanation for a derogatory mark that might justify an exception.

The lender will also assess the length of your credit history, your repayment patterns, your credit utilization and your credit score to determine your credit worthiness.

There’s no minimum credit requirement for the USDA loan, however, borrowers with a credit score of 640 or higher are eligible for streamline processing, an automated underwriting process. Borrowers with a credit score lower than 640 are still eligible to receive a USDA loan, though they will be subject to the standard underwriting process. If you have a nontraditional or no credit history, you might still be eligible for a USDA loan; lenders evaluate such applications on a case-by-case basis.

USDA Income Limits

Since the USDA home loan program was designed for low- to moderate-income buyers, it has strict income eligibility restrictions. The income limits for USDA loans in Maine vary from county to county and are based on the total income of all members of the household over the age of 18. Income caps for a guaranteed loan in the state of Maine are shown in the chart below.

We can help you determine your eligibility for a USDA loan in Maine. Contact us to set up a meeting.

USDA Property Eligibility

Although USDA loans in Maine aren’t solely reserved for farms or properties out in the sticks, the program does have some fairly stringent property eligibility requirements. To be eligible for the USDA home loan program, a property must be located in a rural area with a population no higher than 35,000. The USDA defines “rural area” as any property in open country that isn’t part of or associated with an urban area.

Fortunately, the vast majority of Maine — with the exception of the more populous areas around Portland, Auburn and Bangor — is USDA-eligible, which means you have more properties from which to choose. To see exactly which areas are USDA-eligible, take a look at this interactive map.

Once you’ve found the ideal property, you’ll need to undergo an independent appraisal from a state-licensed, USDA-approved appraiser. The appraiser will assess the property’s value and structural soundness to ensure that it meets USDA regulations, which include the following:

• The property must meet state building codes.
• The property must be immediately livable, and its safety and soundness must be intact.
• The property must have street access.
• The well and septic tanks must be at least 100 feet away from the home.
• The value of the land cannot exceed more than 30 percent of the value of the property.

Only once you receive approval from the appraiser can you move forward with your USDA loan application.

Borrowers can’t use a USDA loan to purchase a second home unless their first home fails to meet the USDA’s definition of “adequate property.” The USDA determines whether your existing home is adequate based on the following criteria:

• Your current dwelling isn’t financed by a USDA direct loan, guaranteed loan or active grant.
• You are financially qualified to own more than one house.
• You intend to establish the home financed with the guaranteed loan as your primary residence throughout the term of the loan.
• Your current home no longer adequately meets your needs (especially in the case of overcrowding).
• The disability or limited mobility of a permanent resident of your household cannot be accommodated without substantial retrofitting of the current property.
• You have relocated with a new employer or have been transferred by your current employer to an area outside reasonable commuting distance.

If you still aren’t sure whether you qualify for a USDA loan, talk to an experienced mortgage broker today to take the first step on your journey toward homeownership. With over 150 years of collective mortgage experience in New Hampshire, Maine, Massachusetts, Connecticut, Vermont, Rhode Island, Florida, North Carolina, Colorado, Texas, Georgia, and South Carolina, the brokers at Blue Water Mortgage have the necessary expertise to close your loan on time and secure the best terms and lowest rates possible.

Roger Odoardi

Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.