The USDA loan program is a great loan program used to purchase, repair or renovate a home. This loan will allow you to get up to 102% financing. The seller can pay all of your closing costs; there is no limit on the amount they can pay. There is no monthly mortgage insurance which keeps your monthly payment low and you do not have to have any funds in the bank to qualify. You do not have to be a first-time homebuyer to qualify. All USDA loans are for a 30 year term and the interest rate is fixed.
There are two limitations on who will qualify for this type of loan. The first limitation is income and the second is property location.
The household income limit is up to 115% of the median income for the area. You must be able to afford the mortgage payments, including taxes and insurance. Your income can be reduced by some child care expenses to qualify. The income limits are different for each county. The county used would be the county in which the property is located, not where you live currently.
The property must be located in an eligible area. Rural areas include open country and places with a population of 10,000 or less and under certain conditions towns and cities with between 10,000 and 25,000 residents.
The main underwriting guidelines are as follows.
The home must be used as a primary residence. You cannot own another home within local commuting distance. Only single family units including condominiums are allowed. Only new, never occupied manufactured homes are allowed.
Loans are up to 100% of the appraised value or acquisition cost plus closing, whichever is less. The 2% loan guarantee fee may be rolled in resulting in a maximum loan to value of 102%.
Appraised value is the amount that the appraiser determines the house is worth; this is different from the sales or purchase price. The acquisition cost is the cost to buy the house. For example: If the house appraises for $200,000 and your sales price is $180,000 with closing costs of $5,000, the maximum loan would be $185,000 plus the 2% guarantee fee to USDA.
The maximum debt ratio is 29/41. If the home is built after January 1, 2000, the maximum ratios increase to 31/43. If you have good credit, higher ratios may be approved.
Your debt ratio is calculated by taking your new mortgage payment and divide by your monthly income, this would be limited to 29% or 31%. The second debt ratio is calculated by taking the mortgage payment and adding in other monthly debt (car payments, credit cards, etc. – utilities, phone are not included), then divide by monthly income.
For example: If your monthly income is $4,000 and your mortgage payment is $1,200, then your front ratio would be ($1200/$4000) or 30%. If you have $400 in other payments each month, your back ratio would be ($1200 $400=$1,600/$4,000) or 40%.
There is a minimum FICO of 620 if you have non-traditional or no credit history. There is a streamlined approval process if you have credit scores above 620. Non-traditional credit are things like rental history, payment history on your utilities, etc. These are items that do not show up on your credit report.
As you can see, this program is great for borrowers with little money and decent credit or non-traditional credit. It will allow you to buy a home with no money down and your payment will remain low with a fixed interest rate. Give us a call to see if you would qualify!
The USDA loan program is a great loan program used to purchase, repair or renovate a home. This loan will allow you to get up to 102% financing. The seller can pay all of your closing costs; there is no limit on the amount they can pay. There is no monthly mortgage insurance which keeps your monthly payment low and you do not have to have any funds in the bank to qualify. You do not have to be a first-time homebuyer to qualify. All USDA loans are for a 30 year term and the interest rate is fixed.
There are two limitations on who will qualify for this type of loan. The first limitation is income and the second is property location.
The household income limit is up to 115% of the median income for the area. You must be able to afford the mortgage payments, including taxes and insurance. Your income can be reduced by some child care expenses to qualify. The income limits are different for each county. The county used would be the county in which the property is located, not where you live currently.
The property must be located in an eligible area. Rural areas include open country and places with a population of 10,000 or less and under certain conditions towns and cities with between 10,000 and 25,000 residents.
The main underwriting guidelines are as follows.
The home must be used as a primary residence. You cannot own another home within local commuting distance. Only single family units including condominiums are allowed. Only new, never occupied manufactured homes are allowed.
Loans are up to 100% of the appraised value or acquisition cost plus closing, whichever is less. The 2% loan guarantee fee may be rolled in resulting in a maximum loan to value of 102%.
Appraised value is the amount that the appraiser determines the house is worth; this is different from the sales or purchase price. The acquisition cost is the cost to buy the house. For example: If the house appraises for $200,000 and your sales price is $180,000 with closing costs of $5,000, the maximum loan would be $185,000 plus the 2% guarantee fee to USDA.
The maximum debt ratio is 29/41. If the home is built after January 1, 2000, the maximum ratios increase to 31/43. If you have good credit, higher ratios may be approved.
Your debt ratio is calculated by taking your new mortgage payment and divide by your monthly income, this would be limited to 29% or 31%. The second debt ratio is calculated by taking the mortgage payment and adding in other monthly debt (car payments, credit cards, etc. – utilities, phone are not included), then divide by monthly income.
For example: If your monthly income is $4,000 and your mortgage payment is $1,200, then your front ratio would be ($1200/$4000) or 30%. If you have $400 in other payments each month, your back ratio would be ($1200 $400=$1,600/$4,000) or 40%.
There is a minimum FICO of 620 if you have non-traditional or no credit history. There is a streamlined approval process if you have credit scores above 620. Non-traditional credit are things like rental history, payment history on your utilities, etc. These are items that do not show up on your credit report.
As you can see, this program is great for borrowers with little money and decent credit or non-traditional credit. It will allow you to buy a home with no money down and your payment will remain low with a fixed interest rate. Give us a call to see if you would qualify!