A USDA Mortgage Loan is a true no money down home loan that can be used to purchase an existing home. The loan is offered by a third party lender and USDA is the government agency that insures the loan. If a homeowner defaults on the mortgage USDA pays back a portion of the money lost to the lender. This is how they can offer 100% financing with low rates and fixed terms, as the lender is insured to receive money from USDA if the buyer defaults.
Who is Eligible?
You do not need to be a first time homebuyer to qualify for the loan. The USDA Loan does have a few requirements that other loans do not have.
You must be purchasing a home in an eligible area. Although the home loan is a rural loan, many cities qualify that you wouldn’t necessarily view as rural. We would be happy to check the eligibility of a certain home you have in mind.
The other main requirement is your income. USDA has income limits that you must not exceed for the program in order to qualify. These are household limits, not applicant limits. This means that anyone living in your household with income will need to be included when determining your household income for eligibility, regardless if they are on the loan or not. The income limits are different for every county and do depend on family size and other family circumstances. It is best to contact one of our experienced loan officers to determine if your household will qualify.
How Can I Qualify?
Qualification for the USDA Loan is lenient compared to the other government loans. If you have an average credit score and sensible credit history the process can be easy and quick. In some cases, less than perfect credit can still be approved with the correct explanations and current payment histories. The best way to know if you will qualify is to fill out our easy, secure online application and one of our loan officers will contact you immediately to discuss your options.
What is the Process?
The loan process can sometimes be intimidating for a first time buyer or even a buyer that has not gone through the process in a few years. The lending and mortgage world have drastically changed since the housing and foreclosure crisis. Rest assured we are experts with the USDA Loan requirements and can make this process easy and smooth for you.
The most important step in the home buying process is to get yourself pre qualified. A simple pre qualification only takes a few minutes and you can have the peace of mind you need when shopping for your new home knowing you are able to purchase and knowing what you can realistically qualify for.
Once you are pre qualified it is helpful to work with a realtor who can help you find your perfect home. If you need a referral we would be happy to recommend a realtor in your area.
How Long Will It Take To Close?
This is one of the most asked questions when it comes to any mortgage loan. For USDA, it is possible to close in 30 days or less after you have a signed contract. These times can vary for each state and each purchase so it is best to speak with one of our loan officers who can give you the current closing timeframe for your exact situation and state.
There are a few other specific guidelines that USDA has that are worth of mentioning. When applying, please tell your loan officer if you own other property as there are specific requirements USDA has when it comes to buying a new home with a USDA while owning another property.
USDA also has a guideline about income producing properties. USDA will not finance any income producing properties including but not limited to farming capabilities, large barns, horse properties, garage apartments, in-law suites etc. Even if you do not plan to use the home for income purposes, the USDA will not approve the loan if the home has the capability to produce income. This guideline is very detailed so it is best to go over your specific case with one of our experienced USDA Loan officers to determine if the property will be a concern.
Direct USDA Loan vs. Guaranteed USDA Loan