USDA Loan Eligibility is a very basic process. A borrower's income and credit file must be underwritten just like any other loan program. However, USDA rural development loans are far more lenient when it comes to down payment requirements and credit score requirements. There are many great benefits to USDA Rural Development Loans. This loan program enables a borrower to obtain a mortgage with the cheapest possible monthly payment when compared with FHA loans and 3.5% as a down payment.
STEP ONE: Is your middle credit score above a 620? If so, then you may proceed with USDA loan eligibility. Do you have recent derogatory items on your credit report such as foreclosures, bankruptcies, judgments, tax liens, or collections? If so, then call me to discuss the details. For basic details, please see the following:
- Foreclosure- Must wait 3 years
- Bankruptcy- Chapter 7 must wait 3 years, Chapter 13 must wait 1 year
- Judgments- Must be paid and have none outstanding within 12 months
- Tax Liens- Must be paid and have none outstanding within 12 months
- Collections- May have one collection within the last 12 months
STEP TWO: Is the property you are looking to purchase in a USDA rural loan eligible area? Below, click accept, then select your state. Find your county on the map or on the list. If the county is not on the state list, then the entire county is INELIGIBLE for a USDA Rural Development Loan. If the property is located in the lighter colored area, then it is located in a USDA Loan Eligible area. The USDA loan eligibility map will state whether or not the property is approved for USDA.
STEP THREE: Does your total household income meet the USDA Income Requirements? There are two separate income levels. The first level is for a household of 1-4 family members. The second is for 5 or greater. Every county varies on the total household income limit. The limits typically range from 70,000 (1-4 members) to 110,000 (5+ members). Below, enter your state, then enter your county and follow the next steps.
STEP FOUR: Apply online, over the phone at 770-631-5750, or in person. USDA Rural Housing Loans take approximately 30 days to complete. If you have questions, contact me or visit TheUSDAhomeloan.com or contact your local loan officer.
Justin Messer | Active Rain Confirmed Loan Officer | SEO Trainer
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Justin - Thank you for sharing an informative and helpful blog.
John
Thanks for the comment John. I hope everyone is able to save this post and use it often. It is much easier having the information at one location than having to navigate several pages in order to find all the qualifying criteria.
A listing of mine will close next week with the buyer using a USDA loan. I live and work in Asheville, NC, but many of the nearby areas qualify (as I understand) for USDA loans. I'll be meeting new buyers tomorrow who hope to buy with a USDA loan. I'm so glad it's available since, in both cases, these loans will be given to unrepresented buyers who, like alot of people, want the American dream of having a home.
Are there any requirements on short sales? If someone had a short sale 5 months ago would that knock them out of the program?
Great blog, USDA loans are very popular in my market. Probably 60% of my closed sales. Have you heard anything about the government running out of funds by April 30? I posted a blog about it yesterday.
I love USDA loans but it does appear that the government has run out of funds.
@ Erica Ramus...Yes, but it depends how the previous mortgage is reporting on the credit report...there cannot be any mortgage lates.
Thanks. That was very interesting and very easy to follow. I have a friend who's been doing these for several years and has done very well with them. Now I understand it better.
Evelyn,
Good luck with your meeting tomorrow. You are so right! USDA absolutely helps buyers obtain the AMERICAN DREAM. Im sure many folks these days believe that the dream is, or can be, close to impossible. Hopefully, your buyers are either first time buyers or current renters. This program is for buyers that are looking to purchase a "primary" residence only. They cannot use this program to purchase a second home or investment property. There are a few instances in which a buyer can own more than one property and still use USDA (relocations and increase in household size), but it rarely happens.
For your meeting tomorrow, advise your clients that USDA is likely to exhaust their funds by then end of April and to work quickly if they would like to purchase with a home without a down payment. Also keep in mind that USDA funds will most likely be replenished soon so do not brush off this great program!
Erica,
Unfortunately, short sales are treated like foreclosures. It is absolutely ridiculous that this is the case. The borrower cannot have any mortgage lates within the last 12 months. Most foreclosures/short sales have to wait 3 years in most loan scenarios.
Marilyn, Damon, and Stephanie,
USDA has run out of funds for the past few years. This is simply because the loan program has become so popular. Over the past few years, when they run out of money, it is almost guaranteed that they will be granted more funds. My mortgage company (a correspondent lender) has always closed these loans long after the funds were depleted. This is because there were conditional commitments given because USDA always receives more funds. As of now, lenders are not going to do this because USDA has not be given notice of any kind of replenishment.
Do we think OBAMA's administration will make the right call to replenish the funds? I'd like to think so. If they wait too long, then thousands of buyers will miss out on the "first time buyer credit" or simply not be able to purchase due to the lack of a down payment. Withholding funds for an extended time will absolutely hurt this portion of the housing market. As soon as I find out, I will re-post to let everyone know.
Stephanie, I am sorry to hear that many of your lenders run from this program. It is, in my opinion, a myth about USDA and all the extra work and time that is needed to close these loans. If a borrower qualifies, based on my blog and other normal qualification criteria, then the loan is extremely easy. In fact, these loans are easy and close much faster than any loan program out there. My mortgage company underwrites USDA loans in house. So, maybe I'm biased. The only delay with USDA is that you have to send the appraisal to their office for a simple stamp of approval. Depending on the month, time of the month, and market demand of the state, USDA can take a couple of weeks to review the appraisal during a really busy period. Other than that, they are very easy. I'd be happy to advise any agent or loan officer on the details of this great loan. With FHA increasing their requirements, I would certainly turn to USDA first. Especially, because USDA payments are always cheaper than FHA since there is not mortgage insurance!
I hope this helps. Thanks for the comments.
I created this blog post so that Real Estate Agents and Loan Officers can bookmark it so that they can easily check to see if there potential buyers or borrowers qualify for this program. This way, everyone can search the main criteria without having to search other websites and spend extra time searching to see if their "potential" client qualifies.
CHEERS
As of yesterday the USDA is out of money nationwide for funding these loans. If you have a contract it will close, if you are working with buyers under this program and do not have them under contract there is currently no money available. The government may find more money for the program in coming weeks.
Timely blog for me I am working towards one of these loans for a client right now.
Justin: Good summation. Thanks! Of course, it looks as if USDA money may not be available after April 30 of this year at this point. Hopefully borrowers can close by then. Thanks again!
Great info Justin. Thanks for posting it, and I look forward to any updates.
Thanks for the informative post! Good information well presented.
Thanks for the update Alan! Even though USDA is currently out of money, I would go ahead and get familiar with the loan program because it will be back on line soon!
I read an Active Rain post earlier this week that said USDA loan monies would run out by the end of the month. Is this true or is the poster doing the end of the world is near paranoia? Oops, this is the second time I forgot to read comments. Thanks for the above reply.
I do these loans myself. But this was a very informative and well-written post. I'll direct LO's to read this.
Thanks Stephanie. Sorry for the mix-up!
Justin, great post for a reblog. I haven't used this program but this is a good reference.