USDA Home Loans

Happy Labor Day Weekend

It's the last big weekend of summer.  How are you celebrating?  It looks like the weather here in Washington State will not be too promising for camping unless you bring your rain gear and a blue tarp.  I think we will stay close to home and have a barbecue with family and friends. 

Wrapping up the week it appears as if the market may be picking up a bit.  Had quite a few inquiries for the USDA Home Loan this week and with all of the great buys out there in the market right now I am sure some great deals will be made this weekend.  I know my clients are excited to get out and shop for a home.  Allot of families would not get the chance to buy a home without the help of this program.

Interest rates for the USDA Home Loan did not see allot of movement this week.  Typically the interest rates stay even with FHA interest rates.  I know some people think the interest rates are higher on USDA Home Loans because they do not require a down payment but that is not the case. 

Whatever your plans I hope you enjoy them to the fullest!

Cheryl  Orr - Your Washington State USDA Lender offering USDA Rural Development Home Loans since 1996!

                                                                                                                                                                           

USDA Home Loans - Credit History

I wrote a post earlier about USDA Home Loan Credit Score Requirements.  This post explains a bit more regarding your Credit History, and what is acceptable for a USDA Home Loan.

Basically the requirement states that you must have "a credit history that indicates a reasonable ability and willingness to meet obligations as they become due"

No Credit History:  If you have no credit history we would establish a credit history for you by providing at least 3 and hopefully 4 alternative credit sources.  These are items such as your rental history, cell phone, utility, cable, daycare, storage etc.  We ask the creditor to provide your payment history and we have them added to your credit profile.  There are many people who have never used their credit and have no scores or documented history.  Under the USDA Home Loan Program this is acceptable and does not eliminate you from qualifying for a home loan.

The following items are considered unacceptable unless we can provide evidence that the cause of the problem was beyond your control, were of a temporary nature and have been removed and/or remedied.

• Bankruptcies must be discharges 36 months from date of application.
• Judgments must be paid 12 months prior to date of application.
• Foreclosures must be 36 months from date of application.
• Two or more rent payments paid 30 days late with the past 3 years.
• Accounts that have been sent to collection within the past 12 months.
• Collections that are outstanding with no arrangement for payment.
• Charge-offs that have occurred in the past 36 months.

It's important to remember that these are just basic guides and you should never assume that you may or may not be eligible for a USDA Home Loan without speaking to a qualified USDA Lender.   

USDA Home Loans - Credit Score Requirements

Credit Scores Requirements for USDA Home Loans

Currently there is no minimum credit score requirement, however scores below 620 may require a more stringent review of the credit history along with documentation to support the lower credit scores. 

This review would require looking at the most recent 12 months rental history.  Possibly providing a written explanation regarding the lower credit scores.  This letter is very common and is written to establish your intent for good credit.  The letter should explain the reasons behind any negative items on your credit report as well as explain that the circumstances surrounding these items were temporary, beyond your control and you have started and/or made progress towards correcting them. 

Items such as medical collections, a missed payment or perhaps you were layed off for a short time, had an illness or death in the family.   These are very common and it is understandable that people have things in their lives that can effect their finances and credit history.   

That is one of the great things about the USDA Home Loan - it is what we like to call "make sense" underwriting.

On the flip side scores 620 and above are considered to be a good score and in some cases may allow for a few dings such as a late payment or owing collection on your credit with no review at all.

Please remember that this is just a basic guide to help you learn about USDA Home Loans.  You should never assume that you may or may not be eligible to purchase a home through this program without first speaking to a qualified USDA Lender. 

USDA Home Loans - Eligible Income

In my previous post I talked about USDA Home Loan Income Limits.  Before we determine if you meet the Income Limits we need to determine your annual income.  USDA income determinations are based on your current and projected income.  If it is difficult to determine the current projected income we are allowed to use  an average of the previous 12 months.

The types of income that may be considered include:

Current verified income from full or part-time employment including

• Seasonal work
• Commissions
• Overtime
• Bonuses
• Unemployment compensation
• Tips
• Car Allowances

Other types of income we may consider include:

• Social Security Income
• VA Benefits
• Disability Income
• Retirement Income
• Interest & Dividends
• Alimony & Child Support

When calculating your income for a USDA Home Loan  we always use your Gross Income before any deductions for payroll taxes or employee benefit programs.   Since the USDA Home Loan has the Income Limits it is very important to make sure your income is determined correctly and we are able to fully document where the income is coming from and how it is paid to you and that it will continue to be paid.

Of course there are other types of income that people receive and there are also types of income that we are not able to use such as Foster Care.   

This information is intended as a guide only.  Never assume that you may not be eligible for the USDA Home Loan without talking to a qualified USDA Lender. 

USDA Home Loans - Income Limits

The USDA Home Loan income limits in Washington State are not that bad.  The limits vary per County and the number of people living in the household.  We are allowed to deduct $480 per child, annual child care expenses and $400 for elderly or disabled persons from the gross income.

For example: 

Family of 4 - Mom, Dad, child age 14 and child age 6.   

Gross annual income before any deductions is $91,000.  The Income limit for Snohomish County is $88,400.  Let's assume the 14 year old no longer requires childcare but the 6 year old goes to an after school daycare program during the school year and full time during the summer. 

USDA Income Limits were updated 4/20/2009....

• Gross Income $91,000
• Deduct $480 for 14 year old
• Deduct $3,900 child care for 6 year old
• This brings our income to $86,620 which is below the County Limit of $88,400.

That's great news!  This family meets the income guidelines established by Rural Development. 

To find out if you are eligible under the income limits for Washington State be sure to visit my post on USDA Income Calculation to learn about the types of income considered eligible for a USDA Home Loan as well as how your income will be calculated.  There is also a great income calculator on the USDA Income Eligibility Website.   

Never assume that you may not be eligible for a USDA Home Loan without first speaking to a qualified USDA Lender. 

USDA Home Loan - Property Requirements

With a USDA Home Loan you  can purchase a new or existing home that you intend to live in.    It is available to help families buy a home with No Down Payment in Rural Designated Areas. 

While most homes will qualify for this program - there are a few items you should be aware of to avoid any surprises down the road.

• You must occupy the home.  (No Rental Properties)
• The home may not be located in a Flood Zone.
• The home may not be used for income producing purposes.  (Farm, Rental,etc)
• Streets & Roads should be paved, but can have an all weather surface such as gravel if it is typical for the area.
• The property may not be subdivided.
• If the home is on a larger piece of land such as acreage than the value of the land cannot be more that 30% of the total value.  For Example:

Lets say you find a nice home on a one acre lot.  If the purchase price of the home is $250,000 than the value of the land cannot exceed $75,000.  This is not a very common problem but it is something to be aware of since allot of the homes in these "rural" areas tend to be on larger lots.

Last but not least:  The home may not be on the Historical Homes Register.  This again is not something that happens often but we have seen it.  If the home is 50 years or older than USDA Rural Development must get this information from the State Historic Preservation Office.  This can take a while and may delay your closing if you are not aware of it from the start. 

There you have it!  You can buy a nice home in a rural area with No Down Payment, a Lower Monthly Payment and save a ton of money.

You can apply for a USDA Home Loan here.  Never assume that you or the home you would like to purchase will not be eligible for a USDA Home Loan.  Always speak to a qualified USDA Lender first.

USDA Home Loans - Rural Property

USDA Rural Property - Washington State 

USDA Home Loan applicants are often mislead by the term "rural".  USDA Rural Development says a rural area includes open country and places with a population of 10,000 or less and towns and cities with a population between 10,000 and 25,000 residents.  Don't let that scare you off before exploring the areas that are considered eligible.  There are allot of areas that are considered "rural" that are actually quite the opposite of that designation. 

USDA has a great property eligibility calculator that can help you determine if a property is eligible just by inputting the address.  This is a great tool for those properties that might be just on the border of a "rural" designated area. 

There really are not any exceptions to this rule but at the same time it doesn't mean you have to buy a home out in the middle of the country.  I have provided USDA Property Maps for Washington State on a previous post that you can print out and take with you on your home-shopping journey. 

Go ahead and search these rural areas and see if you can find a home that at the same time allows you to get one the best loan products out there.  Remember, there is no down payment required and a lower payment with a great 30 year fixed interest rate.

You can apply for a USDA Home Loan here.  Never assume that you will not qualify for a USDA Home Loan with out talking to a qualified USDA Lender.

What is a USDA Home Loan?

When most people think of USDA they think of farms and cows and meat inspectors.  Few people are aware that USDA also provides home loans.  That's right the United States Department of Agriculture has a home loan program! 

Here are the highlights.

• No Down Payment Required!
• No Monthly Mortgage Insurance!
• Cash Reserves not required!
• Closing costs can be financed or paid by the seller!
• Flexible Credit Guidelines

With the help of the Rural Housing Service (RHS) an agency within the United States Department of Agriculture more families and individuals are able to purchase homes in rural designated areas.

So what does all that really mean.  Let's break it down.

No Down Payment - Nothing required, Zero, Zip, Nada! 

No Monthly Mortgage Insurance - Lower monthly payment. 

No Cash Reserves - Some loan programs require a certain number of months payment in your bank accounts to fall back on.

Closing costs can be financed.  With a USDA Home Loan we can finance the closing costs up to the appraised value of the home.  For example:

• Purchase Price $100,000
• Appraised Value $105,000
• Closing Costs $3,000   (estimate only)

On the above scenario we would be able to finance $103,000.  The purchase price plus the closing costs.  This is very helpful to you when negotiating the purchase price with the seller.

Flexible Credit Guidelines -  There are no minimum credit score guidelines, however scores below 620 do require a more stringent review.   

There is still hope out there for people who do not have the funds available for a down payment.  As more and more mortgage lenders are forced to tighten and limit their credit guidelines the availability of the USDA Home Loan makes the reality of owning a home available to a much larger percentage of americans.

If you have questions or need assistance you can contact me at cherylaorr@yahoo.com

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USDA Home Loan Information

Welcome,

If you are looking for information on the USDA Home Loan offered thru USDA Rural Development and Rural Housing Service you've landed in the right place. 

This particular loan program seems to have many names.  It is often called the USDA Rural Home Loan or Guaranteed Home Loan.  No matter the name it all comes from the same place and has the same requirements.

I have been helping families and individuals with the USDA Home Loan since 1996.  I get allot of questions from home buyers and realtors so I thought I would create this blog as a reference and resource to help educate you on the benefits of purchasing a home thru the United States Department of Agriculture - USDA Home Loan. 

Take a look around  - I have provided you with basic information and guidelines

USDA Credit Guidelines  - USDA Income Limits - USDA Property Requirements   

Hopefully this will help you with your decision to buy a home, learn of the benefits available to you thru the USDA Home Loan and help you make an educated and informed choice about the loan options available to you when purchasing a home.

If I left something out or you require more information please let me know.  In the mean time feel free to roam around, leave a comment or share with others.

You can apply for a USDA Home Loan here.

Thanks for stopping by.