Frequently Asked Questions
Are only first-time homebuyers eligible?
No, you do not have to be a first time home buyer. The USDA Loan program has no restrictions that prevent previous homeowners from using the program.
What is the maximum amount that I can borrow?
There isn’t a limit to the amount a homeowner can borrow; however, most lenders conform to the loan limits set forth by Fannie Mae and Freddie Mac and will extend financing for up to $424,100.
How much are the closing costs for a USDA mortgage?
Closing costs vary from lender to lender and state to state. The charges from the USDA are a Guarantee fee of 1% of the loan amount. Additionally, there is a monthly mortgage insurance factor of .35% of the principal balance.
Can closing costs be financed into a USDA Loan?
Yes! The USDA home loan has the ability to finance closing costs up to the appraised value or to get a 6% seller contribution to closing costs from sellers on the contract.
What are USDA eligibility requirements?
USDA requires that the borrower demonstrates a reasonable ability and willingness to repay the mortgage loan. USDA lenders will view your credit history, income, and assets to verify your ability to repay the mortgage.
What is the USDA’s minimum credit requirement?
The USDA has no minimum score required; however, most lenders require a minimum credit score of 620 to obtain financing. Exceptions can be made and you should talk to a loan specialist about this.
Can you qualify for a USDA loan if your credit score is below 640?
Many lenders do require a 640 minimum Fico score to be eligible for a USDA home loan, however, exceptions can be made. It is important to note that the derogatory credit is temporary in nature, beyond the applicant’s control, and the circumstances that caused the adverse credit are no longer a factor.
What does the USDA require for employment eligibility?
You must have established employment to be eligible for a USDA Loan. Almost all lenders will require a minimum of two years of steady employment or schooling prior to your current employment if less than 2 years. If you are self-employed, you are eligible but will be required to provide two years of federal tax returns to verify your income.
Do USDA home loans have PMI?
USDA mortgages do have a guarantee fee and monthly PMI. The rate for the mortgage insurance is .35% of the outstanding principal balance and the current guarantee fee is 1% of loan amount. For example, if you borrowed a full $150,000 from your lender, the guarantee fee would be $1,500, which you can finance into your mortgage. The monthly PMI would be about 44.00 dollars a month on a 151,500 loan amount. (which includes the guarantee fee of 1%)
Can I get a USDA Mortgage after bankruptcy?
Yes, the USDA Loan Program requires the bankruptcy to be discharged for at least 3 years for a CH 7 and at least 12 months of on time payments on a CH 13. You can be in a CH 13 currently as long as 12 months of on-time payments have been made and verified.
How soon can you qualify for a mortgage after foreclosure?
VA Loans: 2 years after foreclosure
USDA Loans: 3 years after foreclosure (Exceptions are possible!)
FHA Loans: 3 years after foreclosure
Conventional Loans (Fannie Mae and Freddie Mac): 7 years after foreclosure
Can I use a USDA Loan on investment property or Second Home?
No, the USDA Rural Housing Program is for primary residences only. Furthermore, any property that is income producing (farms, multi-family, over 30 acres, etc.) cannot qualify for the 502 Guaranteed Rural Home Loan.
Can a USDA loan finance a condominium?
Yes, you can use a USDA loan to finance a condo; however, there are requirements that will need to be met.
Does a USDA home loan finance modular or manufactured homes?
Modular and manufactured homes can be considered a USDA eligible property, but additional appraisal requirements will apply. Most lenders do not offer Section 502 USDA loans on manufactured homes; however, they do finance modular homes. The difference between a modular and manufactured is how and where the home is constructed. A manufactured home is already fully built and put on a foundation and modular homes are built in pieces, and then taken to the site to be constructed.
How fast can you close a USDA loan?
USDA loans have a 2 prong process. The loan is first approved by the lender and then sent to the local USDA field office to be insured. Depending on the turn-times at the local USDA office, closing can be as fast as 20 days or up to 60 days.