USDA Loan Requirements

What are the USDA Mortgage Loan Requirements?



To decide if you qualify for an USDA Mortgage Loan, the following will be looked at:

• Your income and your monthly expenses. Standard debt-to-income ratios are 29/41 for USDA Loans. These ratios may be exceeded with compensation factors.
• Your credit history (this is important, but USDA's credit standards are flexible). A FICO score of 620 or above is required for all loans through most lenders.
• Your overall pattern rather than to individual problems you may have had.

To be eligible for an USDA Mortgage, your monthly housing costs (mortgage principal and interest, property taxes and insurance) must meet a specified percentage of your gross monthly income (29% ratio). 
Your credit background will be fairly considered. At least a 620 FICO credit score is required to obtain an USDA approval through most lenders. You must also have enough income to pay your housing costs plus all additional monthly debt (41% ratio). These percentages may be exceeded with compensating factors. Applicants for loans may have an income of up to 115% of the median income for the area. Maximum USDA Loan income limits for your area can be found at http://www.rurdev.usda.gov/HSF-Guar_Income_Limits.html 

Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance.




Can I get an USDA Mortgage Loan after bankruptcy?

Criteria for USDA loan approvals state that if you have been discharged from a Chapter 7 bankruptcy for three years or more, you are eligible to apply for an USDA mortgage. If you are in a Chapter 13 bankruptcy and have made all court approved payments on time and as agreed for at least one year, you are also eligible to make a USDA Loan application.


What are the USDA Down Payment Requirements?

USDA Mortgages have no down payment requirement. Other loan programs don't allow this.


What types of property are eligible?

While USDA Mortgage Guidelines do require that the property be Owner Occupied (OO), they do allow you to purchase condos, planned unit developments, manufactured homes, and single family residences.


What is the maximum amount that I can borrow?

The maximum amount for an USDA Mortgage Loan are determined by:

Maximum loan amount: The is no set maximum loan amount allowed for an USDA Mortgage. Instead, your debt-to-income ratios will dictate how much home your can afford (29/41 ratios). Additionally, your total household monthly income must be within USDA allowed maximum income limits for your area. Maximum USDA Loan income limits for your area can be found at http://www.rurdev.usda.gov/HSF-Guar_Income_Limits.html


Maximum financing: The maximum USDA Mortgage amount will be 100% of the appraised value of the home.

Types of Loans - USDA

USDA stands for United States Department of Agriculture.  Over the last few years USDA or Rural Housing Loan has become the hottest loan in town for most low and moderate income families.  This is because you can get a loan for 100% financing with no Mortgage Insurance.

These programs are tailored towards people who live in Rural Areas.  To determine if the house you are thinking about purchasing is in a rural area and if you meet income qualifications click on the following link:

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

There are two types of loans that USDA offers

USDA Guaranteed Rural Housing Loans
USDA Guaranteed Loans are the most common type of USDA rural housing loan and allow for higher income limits and 100% financing for home purchases. USDA Guaranteed Loan applicants may have an income of up to 115% of the median household income for the area.   All USDA Guaranteed Loans carry 30 year terms and are set at a fixed rate.


USDA Direct Rural Housing Loans
USDA Direct Housing Loans are less common than USDA Guaranteed Loans and are only available for low and very low income households to obtain home ownership, as defined by the USDA. Very low income is defined as below 50 percent of the area median income (AMI); low income is between 50 and 80 percent of AMI; moderate income is 80 to 100 percent of AMI.  You can click here http://www.rurdev.usda.gov/HSF-Direct_Income_Limits.html and see if you qualify for this loan.

Why choose a USDA Mortgage?

1. USDA loans require NO down payment
2. In some cases you can finance your closing costs, Seller can pay up to 6% of your closings costs so really you don't have to come to the table with ANY money.
3. There are NO prepayment penalties for USDA Rural Housing Loans.
4. USDA loans has no monthly Mortgage Insurance.
5. A USDA loan is available to all Rural areas of the country, provided a market exists for the property and the home meets HUD's minimum property standards.
6. You can use this loan to purchase a New or Existing one family home in Rural Areas.
7. No Manufactured Homes allowed unless it is Brand new (talk to your lender about this)
8. USDA loans are offered at 30 years terms with a fixed interest rate.

First Time Homebuyers

You are thinking about buying a home for the first time, you have heard your real estate agent, friends or lender speak about First Time Home Buyers loans... FHA, Rural Housing, VA loans, HUD homes all of these terms really are confusing.  There are several programs available through the government to help you finance your first home.


Now, be aware that the term First time Home buyer is really just that... Agencies now a days don't actually provide money for first time home buyers; instead they facilitate programs that encourage banks and lenders to grant mortgages.

The FHA Loan

The Federal Housing Administration (FHA) provides what is probably the most popular home loan program for first time buyers. Rather than lending the money themselves, the FHA insures a loan made by a private lending institution. This insurance gives the lender a measure of peace in knowing that even if the homeowner defaults on the loan, they will not lose their investment. In such cases, the FHA steps in and pays the balance of the loan, then assumes ownership of the house and resells it.
An FHA loan is designed specifically for first time home buyers in the moderate to low income bracket. Requirements for FHA loans are less strict than those for a traditional fixed rate mortgage. FHA loans are so widely used in the housing industry that they are generally the first ones thought of when first time home buyers apply for a mortgage.

Housing and Urban Development Homes - HUD Homes

HUD Homes are properties offered to low income buyers through a program administered by the U.S. Department of Housing and Urban Development.  As is the case with the FHA loan, HUD does NOT actually loan the home buyer any money.  In fact, HUD doesn't even insure the loan.  A HUD home is acquired through an FHA backed mortgage issued by a private lending institution.  If the home buyer defaults on his mortgage, FHA pays the balance of the loan, then HUD acquires the home and resells it, usually at less than market value.  HUD homes are aimed at home buyers with limited income.

VA Loans

The Veterans Administration (VA) provides a loan program similar to that of the FHA program. Again, rather than loaning money themselves, the VA guarantees a loan made by a private lender. These loans are aimed at U.S. military veterans and their families. A VA loan can be acquired not only by a veteran, but also by a widow or widower as long as that individual does not remarry.
The main advantage of the VA loan is the fact that home buyers are not required to purchase private mortgage insurance or provide a down payment. VA loans are designed to help military personnel purchase homes in areas where financing options are limited.


The USDA Development Housing Loan - Rural Housing


The U.S. Department of Agriculture (USDA) offers yet another guaranteed loan program designed to help lower income first time home buyers purchase homes in rural areas. First time home buyers benefit from this program with no down payment, no mortgage insurance, and lower credit rating requirements to qualify. The USDA understands that first time home buyers in rural environments have additional financial challenges that need to be addressed in order to purchase a home. These USDA-guaranteed loans fit the bill perfectly.

The four types of federal first time home loan programs listed here are but a small sampling of what is available. Various state governments also offer low interest mortgages for first time home buyers, as do some larger cities and counties. Your real estate agent and mortgage broker should be familiar with the government backed loans available in your area. They'll be happy to work with you to acquire the best financing for your needs.

Downpayment Options

I have received many calls and heard may people say that they can't afford to buy a home because they don't have 20% down.  There is nothing further from the truth than that.





*  There is a fabulous loan for Rural Areas that is called USDA Rural Housing Development, this Loan has income limits please see the link below to check income limits on your State

http://www.rurdev.usda.gov/HSF-Guar_Income_Limits.html

With this Link you can check Eligibility

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

This Loan is not for everybody but it is a great loan because you don't have to put any downpayment and the best thing is that you have NO Mortgage Insurance, which could result in very good savings in the long run.  I will go into detail later on in a different post.

*  FHA - The Federal Housing Administration, promotes different types of programs to promote home ownership.  FHA is one of them, this program allows you to get into a house with as little as 3.5% down.  This loans in this market are the most popular, but are not for everybody.   They are easy to qualify as you don't have to have perfect credit, just decent credit.  You can check the link below to see what is the Max Loan amount you can get in your area:

https://entp.hud.gov/idapp/html/hicostlook.cfm


*  VA - This loan is guaranteed by the Veterans Administration.  This loan is good for Veterans.  You can get a loan for 100% Financing, meaning NO down payment and NO Mortgage Insurance.

Check the following Link for Eligibility

http://www.benefits.va.gov/homeloans/elig_center.asp

*  Conventional Loans - This loan is your standard 30 year or 15 year Mortgage, pretty much you have to have good credit, your debt-to-income ratios need to be in line.  Even for these type of loans you can come up to the table with as little as 5% down.  Your Mortgage Insurance will be then high but still you will have an option to come to the table with that little down payment.  You will need to have 20% down in order to avoid paying mortgage insurance.

In order to make a decision on how much down you need to put and which loan program is best for you, review your options with your Lender, they will be able to help you and I am sure they will help you decide which loan will better suit your needs.  These are not the only types of loans you can get either, maybe your lending institution has a portfolio loan or another one that will work for you best.