Buying a home usually involves getting a mortgage, and most people recognize the terms «conventional loan,» «FHA loan» and «VA loan,» but there is another loan program, known as the USDA loan, that is underwritten by the United States Department of Agriculture and has terms and qualifiers better than any other program available. Current USDA underwriting turn times are the same as for other loan packages, and funds are available now. The only hitch – and the word “agriculture” in the name should provide a clue – is that the property must be in a rural area.
Finding a Qualifying Property
The U.S. Department of Agriculture Rural Development website leads you to the local contacts for USDA loans, who can introduce you to the program and help you begin your property search. The representative in your area tells you where to look for qualifying properties. If you don’t want to live in any of the qualifying areas, then the USDA loan isn’t for you.
Home shopping and loan shopping go hand in hand. After supplying substantial paperwork to the lender, you are told how much you can spend on a property. This is a smart first step, as there is no use spending time finding a home and falling in love with it only to realize that your financial situation won’t qualify you for that home. Knowing your spending limit is the best way to go about purchasing a home, and in fact, most real estate agents won’t even show you property www.americashpaydayloan.com/title-loans-id until you are “mortgage approved” by a lender.
The Purpose of a USDA Loan
To encourage home ownership in rural areas, the government instituted the USDA loan program in 1991. The premise was that by committing to a community, the homeowner helps the economy of that community and stabilizes both the economy and the area. To attract homebuyers to rural areas, a USDA loan is available to those with low to average income for the area. There is no down payment required, mortgage insurance is less than other loan types and the mortgage rates are lower than for other loans, according to The Mortgage Reports.
Your income cannot be more than 15 percent above that of the local median income, and the home must be your primary residence. Your credit score must be at least 640, although there are some exceptions, and your debt-to-income ratio must be 41 percent or lower. If you meet those criteria, then you can start researching a USDA loan.
USDA Loan Turnaround Time
Your mortgage lender will insist that you work with a real estate agent who knows the ins and outs of the USDA program. Once you’ve found your qualifying home, substantial paperwork is submitted to the mortgage lender. This is not the USDA but a USDA lender qualified to work with specific types of loans. The lender does all the qualifying, including documentation, appraisals and inspections, as USDA Mortgage Source explains.
Unlike other loans, the USDA loan is a two-step process, and the first step is being qualified to purchase the home. Once you are approved, all the paperwork is sent to the USDA, and in two to seven days, you should have your loan commitment. An additional 35 days is needed to clear the property’s title, do an additional appraisal and perform another credit check. Tax and title are researched, and by the end of the waiting period, your USDA loan status should indicate that you are clear to close.
However, your mortgage can be denied at the last minute if you make big purchases that affect your credit lines, apply for any new credit cards, change jobs or don’t make all your existing payments on time. Also, if your bank account shows a sudden increase in funds, you must be able to explain the source.
- USDA Mortgage Source: USDA Loan Final Approval: Closing Time
- The Mortgage Reports: USDA Home Loan: USDA Loan Requirements & Rates for 2021
- U.S. Department of Agriculture Rural Development: Home
A versatile writer, Jann enjoys research as well as doing the actual writing. A career in television writing, as a magazine editor and celebrity interviewer, Jann adapts to her environment, having traveled the world, living overseas and packing and unpacking her treasures for a new location over 30 times.