USDA Loan Checklist for Lenders? First of all, just What Is A USDA Loan? What is the USDA? Wait, the United States Department of Agriculture issues Mortgage Loans? USDA Loans? But wait, I don't want to buy a farm!
We'll answer all our questions in a moment, but first, let's understand what a USDA Loan is. You don't have to buy a farm to meet USDA Loan Eligibility. All you have to do is Meet The USDA Loan Requirements. And what is the USDA Loan Rates?
"USDA provides homeownership opportunities to low- and moderate-income rural Americans through several loans, grant, and loan guarantee programs. The programs also make funding available to individuals to finance vital improvements necessary to make their homes decent, safe, and sanitary. USDA Multi-Family Housing Programs offer Rural Rental Housing Loans to provide affordable multi-family rental housing for very low-, low-, and moderate-income families; the elderly; and persons with disabilities. In addition, rental assistance is available to eligible families." - usda.gov
So, the United States Department of Agriculture does offer Home Mortgage Loans! But is it a deal? Are they a better deal than a conventional loan? Are they easier to qualify for? How about the USDA Loan Credit Score? Are the income requirements lower?
How Does USDA Loan work?
First, how does a borrower qualify? USDA guidelines basically require applicants are:
- U.S. citizens or legal permanent residents
- There are no minimum credit score requirements, but a credit score of at least 640 makes available online application
- Stable and dependable income
- Ability and willingness to repay the mortgage – and have 12 months of no late payments or collections
- Adjusted household income equal to or less than 115% of the area median income
- The property serves as the primary residence and is located in a qualified rural area
USDA loans are designed to help people living in rural areas purchase a residential home. Happily, the USDA's definition of "rural "is broad, and many suburbs qualify.
According to the USDA, rural areas are defined as "open country, which is not part of an urban area."
The agency's broad definition makes approximately 97% of the nation's land eligible for a rural development loan, including an estimated 100 million people.
Some Advantages Of A USDA Loan
- No Down Payment - 100% financing. Along with VA loans, one of the last remaining $0 down payment mortgage options out there.
- GREAT Interest Rates - With the USDA guarantee, lenders can offer some of the lowest interest rates on the market.
- Low Monthly Mortgage loan - conventional loans usually require PMI (private mortgage insurance) without a 20 percent down payment. FHA loans also have high annual mortgage insurance fees. USDA loans don't have PMI. The USDA uses two prices: an upfront guaranteed fee that is paid once when you close on the loan (1 percent of the total financed amount) and an annual fee (which gets lumped into your monthly mortgage payment). USDA loans have the lowest funding fee of all government-backed loan products.
- Flexible Credit Guidelines - conventional lenders want a credit score of at least 640 but 720 to qualify for the lowest interest rates. There is no minimum credit score for USDA loans.
- Already Own a Home? - This benefit only applies in certain circumstances, but it is possible to own additional property and apply for a USDA loan.
- Competitive Loan Terms - The USDA loan is available in common fixed-rate terms like 30-year and 15-year mortgages.
Requirements Of USDA Loans
Those are the advantages; here are some of the requirements for applying for a USDA Home Mortgage Loan:
- A copy of a State issued photo ID card and social security card for each borrower and non-borrowing spouse
- W2 forms for the last two years
- If retired, award letters for social security, pension, and retirement income
- If retired, 1099 forms for the previous two years for social security or pension
- Receiving child support? Supply divorce decree or child support agreement
- One month's most recent and consecutive pay stubs for each borrower and non-borrowing spouse
- Two years' most recent federal income tax returns for personal or business
- Asset statements for the last two months for checking, savings, 401k, IRA, etc
- Quote for homeowner's insurance
- Termite inspection
There Is No Excuse Not To Try.
So now you've seen the rules. There are some restrictions to consider, but overall, these loans offer a lot for many home buyers. If you're on the wrong side of qualifying for a conventional home mortgage loan, for whatever reason – income, credit history, debt, savings, or employment, the United States Department of Agriculture might be your lifeline. And that's exactly what it's designed for: get people or families into affordable housing! So if it fits your needs, then there's no reason not to jump in.
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