Yesterday I did an introductory post about the USDA Loan Program, comparing it to our Stated Bonded Loan Program CHFA. In that comparisons I listed some of the benefits that each of the programs have over each other. In this blog I am going to just talk about the USDA Loan Program, and go into more detail about the program by providing bullet points that those reading this can use for a quick reference. If you are interested in more information about CHFA please read my past blogs about that program.
USDA is a great loan program for both existing and First Time Homebuyers who do not have much money to put down, or just simply want to hang on to their money for future emergencies or for needed repairs. USDA allows a Borrower to Borrow:
- Up to 102% Loan To Value (LTV).
- Can role in Closing Costs & Repairs if it can be supported by the appraisal.
- Does not have a maximum purchase price.
- Does not have Monthly Mortgage Insurance (PMI).
- Qualifying Ratio's are 29/41 and above with a Ratio Waiver.
- Minimum 620 Credit Score.
Properties that are eligible for USDA loans are:
- Existing homes
- Condominiums
- Townhouses
- 1/2 of a duplex
- Modular homes
- New construction.
- New manufactured homes built to HUD Code.
Even though USDA does not have Sale Price Limits, it does have Income Limits by household size, and they may differ from County to County and State to State. Income Limits Include:
- ALL household income.
- Seasonal/Overtime/Bonus income may be averaged based on verified history.
- Pending pay increases may be used as a compensating factor.
USDA Appraisals are done by FHA approved Appraisers and share many of the new FHA relaxed appraisal requirements, as well as further relaxing requirements of their own:
- Missing Handrails
- Cracked windows
- Dripping faucets
- Peeling paint on door frame/windows (only for houses built post 1978)
- Flat roof on garage, if it could not be inspected
- No smoke detectors
- No GFI's in kitchen/bathrooms
Additional Inspections that MAY apply:
- Septic - only if the Appraiser/inspector requests it.
- Well Water - ALWAYS test well water.
- Termite inspections are only required if State Law requires them, or the Appraiser/Inspector sees active infestation.
There you have it. I tried to keep it as brief and concise as possible, hopefully this provides enough information for those reading this to have a better understanding of this program. There is a Group here on ActiveRain named the AR Rural Development Group which contains other blogs on this program if what to read more about this.
One additional difference between State Bonded Loan Programs like CHFA and USDA, is that USDA will do Refinances and State Bonded Loan Programs like CHFA do not, except through special programs that have been recently created to assist homeowners that are at risk of losing their home.
******************************************************************************************************************
Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
Keep up the good work getting the word out about the USDA program! So many buyers (and Realtors) are unaware of this program. Everyone I talk to about it is suprised about what the USDA considers to be "rural." Most of the property in the far west valley of Phoenix qualifies...
George - Can you tell me if a property being in a 500-year flood plain would make it ineligible for the USDA loan? Thanks! :)
James it is the same in my area. I would have never of thought of Portland, Connecticut as being rural, but USDA is available in Portland.
Debi, I am not positive, and I will find out for you, but I would think that it would be handled like it is on any other loan. I will talk to my Underwriter and Closing Department tomorrow.
George,
Reading your USDA post has given me a much better understanding of what it really is. Do you have to be an FHA lender to do them?
Great pointers George...this is a very detailed post on USDA program.
Esko, I don't know if you have to be a FHA Lender, but I do know that you have to be approved by them. Also I believe that they work with Direct Lenders and not Brokers, that is the impression that I got. Best thing to do is to contact them directly.
Sally, thank you, is it available out there in Hawaii?
George,
This is a great option for buyers... 100% financing is still available..;-)
Ann Hayden in lovely Wildwood, Missouri
George - Another great follow up. Glad to see some of the inspection requirements were relaxed.
Ann, and with those Ratio's these Buyers should be in good shape.
Jennifer, FHA is very close to having the same appraisal requirements.
George,
Really good, concise post on RD loans! It is a great program and there are a number of changes planned to make it even better.
Regarding the 620 score, do know it's not USDA's poilicy yet, but you are correct in that most investors are requiring the 620 score, much like we are seeing on the FHA front. Also you do not actually have to be approved by USDA to originate them. If you're a broker and have lenders that offer the program, you are ready to go. In Florida you simply need to be a licensed to originate.
Gerry Suarez, Jr.
Your FHA Loan Pro!
Gerry, thank you for answering Esko question. I was going to get the cleared up today, but you beat me to it. As far as the 620 FICO, we got that from the local office for USDA this week when one of their Area Specialist met with our Underwriters.
George,
I have closed a few of these recently here in Washington State. Our investors are still offering below 580 and no credit score with alternate credit. There are discount points, but they can be done. The Eligibility website offers assistance for the property and the income guidelines and can be found at:
http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?NavKey=home@1
John Cassels
George... I am running out and I only read the first 5 comments... but @ Esko... you don't have to be FHA approved, even though you have to use a FHA approved appraiser. And brokers can do them through lenders that are USDA approved..... but you have to be USDA approved also. Just a fyi... other than that, good info. PS... if you have a 660 or higher credit score, you don't have to do the dti waiver. thanks
John thanks for the added information. As I stated in the previous blog to this, I am new to this program because it was not available in the towns that I concentrate until recently, but I do see it as a program that my Borrowers can take advantage of. We are going to be having more training on it, so in the mean time I appreciate all of the additional information.
Jeff, thanks for clarifying that for Esko.
To Whom It May Concern:
I have been appraising all forms of real estate since 1977, and would like to be placed on the USDA Approved Appraiser List. Please send me an application for this purpose.
Respectfully yours,
Richard A. Hurwitz, GAA
Certified General Appraiser
Indiana License Number CG49300036
FHA Appraiser Roster Number INCG49300036
Registered Appraiser Pre-licensure Instructor
Indiana License Number INST000597
Registrered Appraiser Continuing Education Instructor
Indiana License Number INST000595
Certified Real Estate Tax Representative
Indiana D.L.G.F. Number 4221
Office Number: 317-818-2322
Office Fax Number: 317-818-2323
Mobile Telephone Number: 317-607-6535