usda loan guide



USDA Loan Guide

Loan Type: USDA Home Loan

Specific Uses: Rural Development, 100% Financing, New Construction, First Time Home Buyers, Refinance, 0% Down Payment, Debt Consolidation, Veteran Households, Remove Mortgage Insurance, Cash Out.

 

What is a USDA Mortgage?

The United States Department of Agriculture (USDA) set the guidelines for the program. This is also called the USDA RD (Rural Development) Loan. This loan type is used to promote growth in areas that are developing. It is one of the best cost effective mortgage products in today’s Real Estate market. Consider one of these loan types if you are looking to live a rural or suburban area. Many lenders are adopting USDA Home Loans in their portfolio.

 

USDA Home Loan Summary:

The USDA loan is guaranteed by the U.S. government. Guaranteed does not mean that every borrower’s approval is certain. Rather, it means that USDA will reimburse lenders if the borrower defaults on the loan. This allows the interest rates to be lower since part of the risk of default has been eliminated. 100% Financing with 0% Down is the only mortgage product like this on the market besides a VA Home Loan. USDA eligibility is based on a mapping grid. Must be in a geographical area that offers USDA Home Loans.

 

USDA Home Loan Guidelines:

  • DTI: (Debt-to-Income) Ratio must not exceed: 29/41%
  • Max Loan Amount: This depends on the county and its Loan Limits
  • Assets: Two months Bank Statements
  • Income: 2 Years full tax returns required
  • Min Credit Score: 620 (depending on Lender)
    • Applicants without any credit history may also be eligible for USDA Home Loans. Must have:
      • Rental History
      • Utility payment records
      • Insurance Payments
    • Max CLTV: (Combined Loan-to-Value) on an USDA Home Loan is 100%
    • Max LTV: on a Cash Out Refinance is 90%
    • Collections: Any Collection balances over $2,000 must be collected or have made payment arrangements prior to closing.
    • Cash Out Max: There is no maximum cashout amount. Depends on county loan limits.
    • Down Payment: 0% Down Payment required on USDA Home Purchase loans
    • Missed a Payment? Only two 30 Day Mortgage Late Payments allowed in the last 12 months.

 

USDA Home Loan Facts:

  • USDA Loan Interest Rates are lower than Conventional Home Loan rates.
  • USDA Loans do not require Mortgage Insurance.
  • Only offer a 30 Year mortgage option.
  • Seller may pay up to 3% of Buyer’s closing costs on sales price.
  • USDA Loans do cover Manufactured Homes. (Depends on whether Lender will cover)
  • Primary Residences only. No investment properties.
  • USDA cannot be used to finance an income producing farm.
  • Streamlined Refinance options available.
  • Manufactured Homes accepted as long as they are new. (In most cases)
  • Gift Funds allowed for closing cost assistance.
  • Low closing costs.
  • Appraisal required on Purchase and Refinance USDA Home Loans.
  • No Appraisal required on IRRRL (streamlined USDA Refinance)
  • Debt-to-Income Ratio’s on a USDA Home loan are usually higher (better) for borrowers with income qualifying issues.
  • USDA Guarantee Fee: 0.40% – 0.50%
  • Funding Fee = 2.75% of Loan amount (depending on when USDA Loan was obtained)
  • Funding Fee not considered as part of total 100% LTV cap. (Funding Fee can be financed)
  • Minimum FICO (Credit Score) Required = 620. Sometimes lower depending on the Lender.

 

There is still much more information about USDA Home Loans provided by the Veteran Administration. Reach out to your bank or lender for more specifics on what you can qualify for.

 

As we like to say here at HC:   Ask. Learn. Save.

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