Who knew the United States Department of Agriculture was in the mortgage loan business? Strange but true. The Department of Agriculture does have a division whose mission is the development of residential housing in rural areas. The following are the key components of the loan:
-100% financing
-Restricted to properties in smaller communities and rural areas of lower population density
-Income limitations based upon family size as the loan is designed for borrowers of moderate means
- Credit is also assessed along the lines of the FHA and VA loans. It is a bigger box than what is allowed with conventional lending. Most lenders will allow scores down to 620 on the USDA loan. We have one lender that allows 640 and above and one that allows 580 and above-but you can expect that the underwriting is much tougher for credit scores lower than 640.
That's it in a nutshell-which is why this is one of the most attractive and popular loans in the State of Indiana and surrounding rural states. In many respects this loan is a hybrid of the VA loan and the FHA loan. It has an upfront funding fee of 2% which rolls into the mortgage like VA. It also has a monthly mortgage insurance premium for the life of the loan similar to FHA. It has no down payment requirement like VA, but there is no mortgage limit as there is in both FHA and VA.
For young families who need their savings for other emergencies this is a perfect method of buying a home.
The USDA loan is underwritten by two entities-the lender who provides the money for the loan and USDA that oversees each loan file to ensure that the home and borrowers meet USDA specifications. Ultimately, USDA is underwritten to HUD guidelines in a fashion quite similar to FHA.
In addition, even though the loan is specific to rural areas it is not a loan that can be used to finance farms or farmettes. Acreage that is in use as tillable acreage makes a property ineligible for the loan. Similarly any barns that can be used to for machine storage or to house livestock are deducted from the value of the property.
The other consideration with USDA is the processing time. If you are looking for a quick closing, USDA is not the best choice. In Indiana due to cuts at the Federal Budget level the number of USDA underwriters are few. During the height of the buying season USDA can take up to 50 business days to process-that is almost three months in calendar time.
In order to increase your likelihood of getting a USDA offer accepted by a seller who is in a hurry to move we highly recommend that you take advantage of our pre-purchase underwriting approval process. Your loan can be underwritten by the lender prior to you having a property under contract so that portion of the process is all but done by the time you select your perfect home in the country!
No comments:
Post a Comment