USDA Rural Development:  Direct Mortgage

  Home Page      

Buyer Eligibility

Property Eligibility

Credit Guidelines

Income Guidelines

Loan Process

504 Repair Loan
and Grant


How To Apply



How to Apply for a USDA Direct Housing Loan

How do you apply for a USDA direct mortgage?  We will explain the details but first you need to understand that every State operates differently and every Area Office with in that state may also operate differently.  All offices are bound by the rules and regulations set forth but there is some flexibility as to how they start the process.  

Some offices prefer a pre-qualification preliminary application (two page form with no documentation or fees) and other offices want a full blown (10 page) application with all your documentation and a fee for the credit report.

My personal recommendation is the pre-qualification rout.  It is a no hassle and no cost quick step to find out if you are "likely" to qualify..  Your information is put in the computer, they pull a no-cost credit report and then will counsel you.  

If you are likely to qualify they will send you a full application.  If there are some issues, they will talk to you about your information details and counsel you as to what you should do so you may qualify in the future.  If  you feel you can dispute or clear up the issues you can still file a complete application.  

However, either way you could still be denied the loan because during the pre-qualification process all discussions are based on un-verified information.  If you submit a full application and documentation, all the information will be verified by the Government and if it is unfavorable you will be formally denied the loan.

Personally, I would prefer the pre-qual method.  Tell me what the issues are and let me fix them.  The choice is yours.  Do call your local office to see how they operate.  Some offices will not do a pre-qual.   Below is a more detailed version of the USDA Application Process.

The devil is in the details.


Pre-qualification involves using unverified information to evaluate the likelihood that a
potential applicant would be program eligible. The results of pre-qualification are not binding.
A potential applicant with possible obstacles to program eligibility may submit an application
and a potential applicant who appears program eligible is not guaranteed that a loan will be

Pre-qualification serves as an opportunity to:

  • Explain the program and the application process;

  • Determine the likelihood of eligibility based on income and other factors; and

  • Calculate the likely maximum loan amount.

  • Encourage the early completion of homeownership education for maximum benefit.

The Agency should provide consistent pre-qualification counseling
for all potential applicants. It can be done face-to-face when a potential applicant
comes into the Field Office or by telephone when someone calls to inquire about the 

Although pre-qualification is not required, it is strongly encouraged because it can 
eliminate unnecessary work for both the potential applicant and the Agency. 

The pre-qualification process does not apply when a Form RD 410-4 (10 page application),
Uniform Residential Loan Application, has been received. The Agency should
proceed directly to the application review and processing (if funding is available).

During the course of the pre-qualification review, the Agency should provide as
much information as possible about how Section 502 program works. Although this information
will be repeated during the course of the application and loan approval process, it is important
for the potential applicant to begin to understand how the program works and the steps that will
be required to obtain a loan.

Pre-qualification provides an opportunity to consider whether the potential applicant
appears to meet the basic eligibility requirements. The Agency should enter into the mortgage software  information provided by the potential applicant and counsel the potential applicant about the following requirements and restrictions.

  • Creditworthiness. The Loan Originator should advise potential applicants about the
    Agency's credit history standards including the ramifications of delinquency on a
    federal debt. To aid in this discussion, the Loan Originator may order an in-file credit
    report if the potential applicant has signed Form RD 3550-1, Authorization to Release
    Information and may also check the Department of Housing and Urban
    Development's online Credit Alert Interactive Voice Response System (CAIVRS)
    and MortgageServ's Borrower Cross Reference screen (Customer/XREF/Social
    Security). Regardless of the results of the infile credit report, the Loan Originator
    must not discourage a potential applicant from submitting an application. The Loan
    Originator must ensure that the race, gender, ethnic group and marital status
    information, when a visual observation can be made, is input into the UniFi system.
    This information is critical for reporting purposes.
  • Citizen or qualified alien. The Loan Originator can ask potential applicants about
    their citizenship status and, for qualified aliens, inform them of the documentation
    that will be required when an application is submitted.
  • Identity Information. The Loan Originator should explain to potential applicants
    the documentation required to verify identity when an application is submitted.
  • Requirement to occupy the dwelling. The Loan Originator should explain that the
    dwelling must serve as a borrower's primary residence, and confirm that the potential
    applicant intends to use the loan for this purpose.
  • Financial information. The Loan Originator should obtain information from the
    potential applicant about household members, income, expenses, and debt in order to
    make a pre-qualification determination of income eligibility and repayment ability.

Copyright 2010 | Kale Enterprise Corp. | Cartersville, Georgia, 30120

Recommended Web Sites:

Email: Rural Development Guidelines

         Disclaimer and Privacy Notice