USDA Rural Housing loans are pretty popular these days mainly due to the fact the program still allows for 100% mortgage financing. 100% mortgages are almost unheard of these days in Florida. This USDA loan, also called the USDA 502 Guarantee loan, or “RD” loan is administered by the United States Department of Agriculture (USDA) and helps buyers in Florida’s rural and suburban areas buy homes more easily. The USDA mortgage is one of the most cost effective home buying programs in the Florida today. Since its inception in 1949, the USDA Rural Development loan has helped over 1 million home buyers obtain housing with little or no money down. In fiscal year 2011 alone, 130,000 people benefited from the program. The USDA mortgage loan has transformed from a relatively unknown niche mortgage program just a few years ago to a mainstream home buyers throughout Florida.
So how can a homebuyer get qualified and approved for the USDA home loan?
Similar to other loan programs like FHA, and VA, rural housing loans aren’t made by the USDA. Instead, the USDA guarantees mortgage lenders making USDA loans against loss. The program is meant to spur homeownership in rural and underdeveloped areas. In order to qualify for a USDA mortgage home buyers must meet two primary requirements:
First, the buyer must buy a home in a USDA approved “eligible” area. In general, USDA property map eligibility is governed by census tract density. Please click here to see the USDA housing map. A buyer’s second USDA eligibility requirement is that household income may not exceed 115% of the area’s median income. Buyers can see all the USDA income limits here. If you aren’t sure about your income and how to calculate in regards to eligibility, please contact us. If you would like to start your USDA loan application, please call us at 800-871-2636 or just submit the “Request Contact” form at the top of your screen.
There are other USDA qualifying criteria that homebuyers will want to know:
- The house to be purchased must be a primary residence – no investment or vacation homes
- The buyer must be at least two years complete from a bankruptcy discharge
- The buyer must have decent credit, most USDA lenders require a min 620 credit score.
- The buyer must meet a qualifying debt-to-income ratio of 29 percent for housing costs; and 42 percent for total debt
Some of these guidelines are flexible like the debt to income ratios for example. Buyers that have very strong credit for example, may be able to exceed the debt ratios limits a bit. Buyers are evaluating on the overall strength of their USDA loan application.
So what is the benefit to USDA loans?
100% financing makes USDA loans among the most desirable mortgage programs still in existence. The only other programs out there that offer this in FL today are VA loans Even better than just no down payment, going this route means the possibility of rolling in closing costs or use grants and gift funds, something most other programs won’t allow borrowers to do.
USDA will permit home seller(s) to pay buyers closing costs, up to 6%. This is great because many buyers won’t need any out of pocket cash. Example, Mr. & Mrs. Jones could ask their seller to pay $6000 in buyers closing costs (6% of the $100,000 purchase price)
No reserves. The buyers are not required to have seasoned funds or a certain amount of bank savings.
Not limited to 1st time buyers. The only restriction is that buyers using USDA financing cannot own a suitable property in the local commuting area.
No USDA title seasoning. Many programs require that the seller of the property own the home for 3 to 6 months or longer. There are no title requirements for USDA loans.
Some USDA Q&A :
What is Considered a Rural Area by the USDA in 2015?
Rural areas include open country and places with population of 10,000 or less and—under certain conditions—towns and cities. There is an automated rural area eligibility calculator for USDA Home Loans at: http://eligibility.sc.egov.usda.gov
What is the Maximum Loan Amount for a USDA Loan?
There is no maximum loan amount for a USDA Rural Development Mortgage. However, it is limited by the appraised value and repayment ability (determined by your household income).
What is the Maximum LTV for a USDA Loan?
The maximum USDA Rural Development Loan To Value (LTV) can be up to 100% LTV plus the Agency guarantee fee of 2%
Can Closing Costs be Financed into the Loan?
Yes, any difference between the contract price and the appraisal value can be used to finance normal closing costs for a USDA Rural Development Loan.
Questions? We are ready to help 7 days a week. For fast service please submit the “Request Contact” form at the top right side of your screen. Mobile users can find the short Request Contact Form here. Be sure to also visit www.FiveStarsMortgage.com for the latest USDA mortgage info.
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USDA Rural Housing -Gaining Popularity 2015