The USDA Rural Housing loan is still a little know mortgage program many buyers still are not aware of. This government backed 100% home mortgage offers a home buying opportunity hard to find these days. USDA ( also known as 502 Guaranteed, RD, Rural Development or Rural Housing) not only allows Florida buyers a way to purchase a home with NO down payment, but also come with a lot of other perks. In the post below we will discuss all the important USDA eligibility and loan qualifying criteria. If you have questions, please reach out to us by calling ph: 800-871-2636. We service all Florida & Georgia Home buyers.
Before we start, let’s discuss some of the pro’s and con’s of the 100 percent USDA mortgage:
USDA Mortgage “Pro’s”
- USDA is the only mortgage program today (for civilians) that allows a home purchase with no down payment.
- In addition to no down payment, USDA allows for buyers to get their closing costs paid by the home seller, or added into their loan under certain circumstances.
- USDA loan applicants are NOT required to be first time home owners.
- The USDA home inspection and appraisal requirements are the same as the other loan programs today – no special requirements.
- Home buyers are NOT required to have a minimum amount of savings.
- Secure and safe 30 year fix terms at low interest rates.
- No USDA loan amount limits – home buyers qualify based on their income and debt to income ratios.
- Lower monthly mortgage insurance. USDA requires a monthly mortgage insurance costs each month like most home loans when the buyer is putting down less than 20%. The benefit with USDA is the monthly PMI costs is nearly 40% less than FHA or conventional loans. Already pre approved for a FHA loan? Be sure to check into the USDA as well for the cheaper mortgage insurance, it could save you hundreds each month.
- Applying for a USDA loan doesn’t require any special education, first time buyer class or down payment assistance – it’s already 100% financing. Borrowers can get pre-approved and start searching for a home all in the same day.
USDA Mortgage “Con’s”
- The property to be purchased must to be located in a USDA approved area. In addition the USDA program has income caps – please read below for more info.
- Student loans – Student loan debt is not deferred when qualifying for a USDA loans. Because of this, USDA loan applicants with significant student loan debt may have encounter obstacles in regards to debt to income ratio limits.
- Closing time frame – The USDA loan program is unique because the loan files are processed in two stages. First by the lender, bank or broker originating the loan, then the file goes through a final review at the local USDA office. This means that USDA loans will take a few extra weeks to close when compared to FHA, VA or Conventional loans. Please note: USDA 502 Guaranteed loans can only be proceed by approved mortgage companies, not directly by the USDA. USDA only processes their “Direct” loan in house. This program is geared towards very low income, subsidized housing.
Florida USDA Rural Housing Eligibility
The USDA mortgage has a few core eligibility requirements that must be met in order to use the program. Let’s take a closer look below.
- The location of the house – The house you decide to purchase must be located in a select rural approved area according to the USDA property map here. You can input the property address and check to see if the house resides in an eligible location. The home can be any single family, town home and select FHA approved condo. Mobile homes and manufactured homes are not allowed. If you need assistance finding USDA approved homes in your area, please contact us below.
- The income for the household – The USDA Rural Development mortgage has income limits or “caps” in place. More importantly, the income caps apply to all income producers living in the house, even if they are NOT listed on the loan application. USDA limits vary based on the number of members living in the household, number of dependents, elderly and county. Contact us below to discuss in detail.
USDA Loan Approval Standards and Guidelines
USDA rural loans are not different than other mortgage programs, as they all have standard qualifying guidelines that must be met. Let’s discuss the USDA guidelines below:
- Credit Score – USDA lenders will want to see applicants have a 620 or greater credit score to be approved. However, a 620 credit score do not guarantee loan approved. All mortgage companies have additional requirements in place for applicants that have experienced a past financial hardship like foreclosure, short sale or bankruptcy. These are called “overlays” Example – if you have a 690 credit score, but had a foreclosure 2 years ago, you would likely need to wait additional 1-2 years.
- Job/Income History- Two years of stable income will likely be needed. You are not required to have the same job for two years, just a stable history. Example: Let’s say you have been working as school teacher for 4 years. You recently left one school and started working at another school. In addition, you took a few weeks off in between. This is okay! Or maybe you needed to take a month off for hardship reasons – this likely would be okay as well. Recent graduates are the exception of this rule as they do not need a solid a two year job history. Self employed borrowers will need two years of tax returns. Any part time jobs will need two years of stable history to be included.
- Debt to income – Like all other home loan programs, USDA has debt to income ratio limits. Borrowers can read more about this under the USDA eligibility section.
- A copy of the borrowers bank statements will be needed during the approval process. Although USDA does not require a min amount of savings, applicants will want to insure they can document any deposit out of the ordinary. Normal weekly, bi weekly or monthly employment deposits are normal and to be expected. However, random deposits will be documented with a copy of the check, and deposit slip. Gift funds from family are also allowed with USDA loans, just be sure to keep a proper paper trail when it comes time to document. Additionally, the gift donor may be required to provide their bank statements as well. These requirements are not exclusive to USDA loans, they are essentially required on all government loans today like USDA, FHA, VA.
Five Stars is Florida USDA rural loan resource. Happy to serve all FL buyers including Lakeland, Jacksonville, Orlando, Tampa, Sarasota, Naples, Tallahassee, Ocala, Gainesville, Pensacola, St. Augustine, Daytona Beach. Buyers that have questions or want to learn about getting pre approved can call 800-871-2636 or just fill out the Request info form on the top of your screen.