So, you may have heard about USDA loans but may not be sure what they are and what they entail. As a Realtor in Central Florida, I often get asked about the different loan options available. I’ve recently helped several buyers in Saint Cloud find properties that are USDA eligible; therefore, I thought it would be helpful to do a series on the different loan (mortgage options available). Since, the USDA loans have been the most popular this month, I thought I would start with this option.
So, let’s talk about what USDA loans are and how they work.
The Benefits of a USDA Home Loan
A USDA loan (also called a Rural Development Loan) is a government insured home loan that allows you purchase a home with NO Money Down. USDA Home Loans offer 100% financing to qualified buyers, and allow for all closing costs to be either paid for by the seller or financed into the loan. USDA offers some the lowest rates of any loan, and you will always have a fixed interest rate.
In addition, you may even qualify if your credit is less than perfect. You don’t have to have amazing credit to get approved; however, you should have at least a 620 to 640 credit score, but you may be able to use credit references like cell phone, insurance and utility bills to build out your credit if you don’t have very much of it.
Am I Eligible for a USDA Loan?
USDA Loan Eligibility will be determined by three factors:
Credit Worthiness: When an underwriter reviews your credit history on a USDA Loan the major thing they will be looking for is a history of paying your bills on time. If you have had blemishes in the past they may be overlooked as long as you have reestablished your credit over the past 12 months. Generally, any open judgments or collections will need to be paid off before you close on your new home.
USDA Loan Income Restrictions: You will need to be able to document your income on a USDA Loan. USDA will generally want to see a two year history of employment or consistent income. Exceptions on the two year requirement can be made for applicants such as students. On a USDA Loan Assets are not required for approval, but can help overcome any possible blemishes on credit.
Where you Live: In order to qualify for a USDA Loan your home must be located in a designated USDA rural area. You can check the USDA eligibility of your county. It might surprise you just how many areas of the United States do qualify for these no money down home loans. The goal of the USDA loan program is to help our nation’s smaller, rural communities thrive by making land and property more affordable.
Owning Additional Property: The USDA does not currently allow buyers to own another “adequate” property and buy another home by utilizing the USDA Loan program. The USDA loan is designed for those buyers who do not qualify for other financing and do not have adequate housing. However, there are certain circumstances when the USDA will allow you to keep the other home. For example, the USDA does not view mobile (manufactured) homes as adequate property. Other circumstances include if you have to move or if your current home is not adequately large enough for the size of your family.
So, as I discussed earlier, Saint Cloud, FL (along with many other areas) is an area that’s eligible for the no money down USDA mortgage; however, you’re still going to need some money for an earnest money deposit, a home inspection & the appraisal.
For more information, you can visit the USDA’s Rural Development website at:http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do.
All my best,
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