No, USDA home loans aren’t for those who need to stock up their fridges with some extra beef or restricted to those who have decided to start their own organic farms.
So what are USDA home loans for, and why are they the only type of mortgage loan you may want to apply for?
USDA Home Loans the New Subprime Mortgage Option?
While the USDA Rural Development Department offers a direct mortgage loan, they also offer a guaranteed loan, backed by the U.S. government, similar to FHA or VA loans.
Originally designed to help rural Americans realize the dream of homeownership, these mortgages can also be used to finance a wide array of properties from single-family homes to multifamily properties and even businesses. Plus, the USDA also provides grants for various development projects.
A USDA loan can be used to purchase, refinance, renovate, repair or even relocate a home. What many don’t realize is that these guaranteed loans offer 100 percent financing to income-qualified individuals, making them as close as you can get to a subprime loan, only with a safe, low fixed interest rate and payments! Be aware, however, that the USDA only guarantees 90 percent of the loan.
Why a USDA Home Loan Should be Your First Choice
There are many advantages to choosing a USDA backed mortgage.
One hundred percent financing makes these loans among the most desirable of loan programs still in existence. The only other programs out there that offer this today are VA loans and transactional funding for those flipping houses.
Even better than just no down payment, going this route means the possibility of rolling in closing costs or use grants and gift funds, something most other programs won’t allow borrowers to do.
Want more? You may even qualify using “non-traditional” credit and you don’t have to have amazing credit to get approved either. You should have at least a 620 to 640 credit score, but you may be able to use credit references like cell phone, insurance and utility bills to build out your credit if you don’t have very much of it.
Plus, USDA direct home loan interest rates are some of the best around and often better than conventional mortgage rates. The rates on guaranteed loans are determined by the individual lender.
The Perfect Loan to Address Current Trends
USDA-backed home loans are really designed to assist lower income borrowers, though who hasn’t found times a little more challenging lately? Well, unless you are Mark Zuckerberg, you have a gazillion shares of Google, or are next in line for promotion at Apple, you may have a good shot at getting approved. These incredibly attractive financing options are also ideal for those who want to take advantage of cheap land prices, buy foreclosures, fix up the home of their dreams or just move a little ways out of the city and grab a few acres for raising the kids with more room in a safer environment.
Who Doesn’t Stand a Chance of Getting a Loan Like This?
Of course, there are a couple of catches to getting a loan like this:
- Income eligibility is capped at 115 percent of your median area income. To check your eligibility, use the income eligibility calculator at the USDA website.
- These are strictly 30-year fixed rate loans.
- You must be able to qualify with maximum debt-to-income ratios of 29/41. To determine if you qualify, add the loan principle, taxes, insurance and interest and divide the sum by your gross monthly income. If this calculates to 29 percent or lower, you qualify. Additionally, your total debt, divided by your gross monthly income must be equal to or less than 41 percent.
- You must be at least two years out of a bankruptcy discharge and be “credit worthy.”
- The property must be in an approved rural area.
- You cannot own another home within commuting distance of the home you wish to purchase.
Comparing USDA Mortgages to Other Common Options
Unless you want to put down a lot of money on a home, USDA beats out conventional financing and even requires less money out of pocket than FHA.
You’ve got cash? Well, think again. There are still tax advantages to taking out a mortgage. Plus, you never know when the thing is going to get blown down and your insurance company is nowhere to be found. You’ll want that extra cash in your pocket then. Just don’t stash it under your mattress or exceed FDIC insured limits in any one banking institution. Who knows who is next to go under, and you may not even get as much as a Bernie Madoff victim if your bank tanks.
USDA may also be a great option for military veterans who have burnt their VA loan eligibility options, and it will be a lot safer taking out an institutional loan than gambling on shady seller financing.
So Where’s the Beef?
With 100 percent financing and easy qualifying, asking about USDA home loans is smart. Make sure you spread the word, too, because there are many others out there who are desperate to buy homes or refinance who don’t know that USDA loans even exist. Your tax dollars go to guarantee these programs, so isn’t it about time you got something back?
{ 78 comments… read them below or add one }
I have a collection that is on my credit report that I have repeatedly asked for verification. The collection agency has not been cooperative in sending me the verification so I am uncomfortable paying a collection that does not belong to me. My score is over 640, and all my open credit cards (2) are at $0 balances with no late payment history.
Will this collection affect my eligibility to obtain a USDA loan? Should I deal with it and try to negotiate a settlement to get it off my report before I apply for the loan?
Any insight or advice would be extremely helpful.
Thanks
Hi! I am interested in a USDA loan. I am ss disability since 2011 and prior to was on ltd due to uychronic disease. As a result, I do not have any credit…let me explain. Bad credit is all from lots of doc bills and i don’t have any positive credit on record. I have no late payments on rent, utilt, ins for since Jan 2011. I was dumb and pd cash back in 2009 for my car, so i have no trad. credit. I know usda will use non traditional credit. My first question is will I be turned down due to med bills; second is will non trad. be enough to build up my credit score for cosideration of loan? My current score is 553, 647, 535. I am a first time buyer so i just am lost as to what to do first. I do know I qualify income requirements except for guarenteed. Thanks so much and thanks for the great info on this site!
Sorry, I meant to say I qualify for a guarenteed usda loan but not a direct. Thanks again! Candace
So what is the difference between the two USDA loans
I have already found a home I am wanting to buy but I have no credit would I even be able to get a Usda loan im on disability and have no way to really make and credit also I have no idea how to build my credit
I am looking at buying a home, possibly with a USDA loan. Question I have is that I know in several years I’ll be moving elsewhere as there are no other jobs in my field in the small city where I live. I know there is a stipulation that a USDA loan can only be for primary residence. Am I allowed to rent the property if the day comes that I get a new job and move elsewhere if I don’t want to sell it immediately?
You have to live in the home. You absolutely can’t rent it. Just read over their whole contract right now.
I am just starting to look at homes and the one I am most interested in qualifies for the USDA Rdev loan. My credit is bad, but I am looking at a home that is well within my income limits. With the mortgage payment calculator I would be paying half of what I am paying in rent now and it comes out to about 1/7 of my monthly income. Do I even have a prayer or should I start looking at apartments to rent?
We are trying to sell our on-frame modular home. A potential buyer got preapproved for a usda loan through a local bank. When the bank found out it was an on frame modular they said they would not be able to do the loan. Can the buyer go directly through usda for the loan and will they still do the loan 100% for 30 years since it is an on-frame modular?
They won’t finance any modular/manufactured homes.
I’m trying to buy a home that’s has a USDA from the sellers however the foundation is buckling and the main beam is split I really want this home but these repairs would need to be done promptly could the repairs be added on to a USDA loa or just find a different house???
Is it possible to use a USDA loan for purchase and repair at the same time? we were approved for 250k and want to purchase a foreclosure for about 220k, can we use the remaining approved amount to make repairs on the home?
I totally disagree. For many reasons a USDA Loan should be the last choice for a Loan.
USDA Is a Tough Collector When Mortgages Go Bad –
“Unlike private firms, the USDA doesn’t need permission from a court to start collecting on unpaid debts. It can in some cases seize government benefits and tax refunds before a foreclosure is completed. After foreclosure, the USDA can go after unpaid balances, even in states that limit such actions by private lenders.”
http://online.wsj.com/article/SB10001424052702304371504577406002591760584.html
….And why are you assuming future failure? I know the economy can affect your money for your payments, but why shouldn’t USDA try to get their payments back anyway they can? You can’t live rent free, and if someone wants to do that then maybe they should get a housing project.
Question: My children receive Social Security Death Benefits every month; my boys are 6 and 15. Does the Social Security count as income, since it goes directly to my sons and paid to them directly?
yes
My husband and I are starting the process of getting a USDA loan for our first home in FL. I am worried about our income. Which does USDA consider, your net or gross income? We hover around the income limit and if they use our gross income, I’m afraid we won’t qualify. Thanks!
Hi Patty,
According to the USDA, “A family’s income includes the total gross income of the applicant, co-applicant and any other adults in the household. Applicants may be eligible to make certain adjustments to gross income – such as annual child care expenses and $480 for each minor child – in order to qualify.”
Remember, these loans are typically for very low income to low income people. The USDA has a calculator on their website that will tell you which programs, if any, you qualify for: eligibility.sc.egov.usda.gov/eligibility/incomeEligibilityAction.do?pageAction=state&NavKey=income@11
Good luck!
Hello,
My wife, and I have just been denied a home loan through USDA. Our lender Idaho housing, approved the loan, and when it went to USDA it was denied. We have had credit problems in the past, but all of our collections have been paid off, and we have never been late, one of our major trade lines ( toyota financial, usbank, and cap one). Our score are (wife 634,600,678) (mine 578,624,655) , it went into manual UW, and USDA denied us because we had a tax lien last year (which is paid off). Our broker did a rapid refund, and got us above 640 she now wants us to resubmit thru a different lender.
What do you think our chances are once we get up to 640 ?
Typically if you are below 640, and have lates on credit in last 12-24 months, they will turn it down.
My husband and I are very interested in this program and think we fit all of the criteria…we are in FL and we just aren’t sure where to start – do we get a pre-approval from a bank, private mortgage company or do we do it all through the real estate agent? Also do we have to have a home we want to purchase before we apply or can we get approved then shop? I also see a few have built using this program – did you do that through the builder and the builders lender/bank?
Our family has relocated to SC from FL. We have leased out our home in FL since last September. Both our fico are excellent and we do fall within the income requirement (he’s a teacher and I’m a hair stylist).
Although I’m very grateful to have a roof over our heads, our goal is to build a home. We’re in the Rural area of SC and fit those requirements too. How long do we have to rent the FL home out before we can apply? There is a signed lease one year lease and all of our payments are current.
Thanks for any advice.
I am not aware of any requirement that states you must lease the other home for a certain time period. Then again, I’m not a mortgage broker. I strongly suggest you speak with a USDA representative. The rep for South Carolina is Loretta Friday (803)253-3094.
Good luck!
Hello, I was approved for a $140,000 loan for a home about 3 months ago and I found a home and signed the paperwork to get everything started only to find that my loan was no longer being approved. Upon further inspection it turns out a missed bill had not gotten paid ($200) which I had no idea of bc I had moved recently and never got the bill or email and simply forgot to check on my part. Anyway all my bills (excluding that one) have always been paid every month and have no outstanding debt. My credit scored has dipped down to 615 bc of this incident which has been resolved but will take 2 months according to them to clear. I don’t want to lose the perfect home I have found after so long. What can I do?
Hi Rita,
Sorry this is happening to you. Try another lender or two, otherwise, wait it out.
Good luck!
Hi Rita,
I had the happen to me as well. Try to get a letter showing your debt has been paid from the creditor. If you are working with a mortgage broker the company should be able to submit your letter to update your credit report and score.
Good Luck!
I have a current usda contract to buy a home in South Carolina the fiscal cliff has effected the process, will the usda uphold the contract with the builder?
I’m sorry, J, I need a bit more information. How has the fiscal cliff affected it?
Also, I think if you call your lender you’ll get better information.
Thanks for the question!
We own a home with a USDA loan, we had to move 3 1/2 years ago because of a job relocation. We have been renting that home to the same people since then and have never had a late payment. We are currently renting another home in another state. Can we refinance this rental home we own with the USDA pilot refinance program to get a lower rate? This home is not an income source for us, we rented it so we could pay the mortgage and we actually lose money on it. Is it possible to refinance this under a USDA program or not if it is considered an investment property because we had to rent it out?
Hi Jamie,
To qualify for the USDA Streamline and non-streamline refinance, the home must be your primary residence.
Hope this helps. . .
if i have one home loan can i apply for another home loan on a home 100 miles away?
I have a conventional loan, but we are looking to refinance with a USDA loan. Is that possible? Most of the information I’m finding on USDA refinance loans is for those who already have a USDA loan.
Hi Pam,
Unfortunately, the USDA only allows refinances of current USDA Guaranteed or USDA Direct Mortgages.
I am 2 1/2 yeard discharged from Chapter 7. I was told to open up credit cards and pay on time which I have and I cannot get approved for a home equity loan. I have tried everything. Any suggestions?
Cydney,
Although your question doesn’t have to do with USDA loans, I’ll take a stab at answering it.
Bankruptcy stays on your credit for seven years. Fannie and Freddie say you may get credit after four years, but it depends on other factors.
Just keep using the card and paying it off every month to build up your credit.
Good luck!
My husband is on monthly installments playing of back taxes. He’s never been late and he’s been paying the IRS since 2010. We put a contract on a house and were denied fha financing. Is there something we can do. He makes very good income but doesn’t have the money to pay off the IRS at the moment.
Hi,
I am considering applying to get a USDA loan. My husband is self employed and has a new business that he just started 6 months ago, so I will be applying alone. I make 30,000 a year and have a student loan that totals $27,000. My payments are $90 a month, and I have no other debts. No credit cards, no bills in my name. When they calculate my debt to income ratio, will they use the $90 a month payment only to figure in the ratio?
Any idea how long it takes USDA to approve the loan once they have the complete loan package? (State of Florida) Thanks
My wife & I applied for a USDA direct loan in October of 2011 the package was completed in May 2012 and we closed on our new house in July 2012, state of Indiana.
We want to apply for a guaranteed USDA loan. We gave up our house in chapter 7 bankruptcy discharged Jan.2010, 3 years ago as of Jan.2013. Foreclosure on the house was completed July 2010. We meet all income and credit guidelines. With these events in mind, when are we eligible for this loan? Have we waited long enough or are we close enough to whatever the required waiting period is to be approved for this loan? Thank you.
Alex, I believe that July of 2013 will be the date you want, as that’s three years from the date the foreclosure was complete.
Hope it works out for you!
Shame on you! USDA loans were intended to assist people who did not have access to adequate housing. Just because you have found that there is little or no oversight with the Guaranteed Loans (as opposed to the Direct Loans who include questions regarding adequate housing on the application), your lack of concern on the impact these loans are having on depleting agricultural land and contributing to urban sprawl is appalling.
My husband and I have been trying to get the direct loan since April. Our realtor kept messing everything up for us and delaying our process. Now we are waiting on the funding to be available. We’ve already been approved for the max amount and have a builder set up to build our house.. Any ideas on when the funding will be available? Of corse I know we’re all waiting on the president & congress to finalize the budget.. But how long after that does it generally take to have the funding? This has been the absolute biggest stress in our family. We’ve been waiting almost a year! Keep that in mind when applying for these loans. They get in no hurry lol
The budget year runs Oct-Oct. We first applied last March, were told funding had run out in June then were re-alerted of funding in October. We made an offer on a house in November and just got our commitment of funding on Friday. We were told early in January that funding was low again so unless you were already under contract nothing could happen until funding became available again. You really have to be ready to move when you get your approval.
I guess we were lucky. We applied for a USDA direct loan in October 2011 and moved into our newly built home in January 2012. But we paid rent to the builder until the funding was approved and we closed on the house in July 2012. We found a good builder who allowed us to rent till we closed however the rent we paid was not deducted from price of the home, a USDA rule.
What is the wait time if you have a foreclosure but not a bankruptcy on your credit? Is it from the time the house went to the sheriff sale or from when the house actually sold?
Hi Rachel,
Three years from date the foreclosure was completed and transferred back to the lender. If the foreclosure was the result of an “acceptable” extenuating circumstance (you’d have to speak with a USDA rep to find out what they consider acceptable) and if you re-establish credit and pay your debts on time, you may qualify sooner.
My husband completed a DIL in Feb 2010.. He has a stable job, good income and good credit scores. My credit us great but I do not work. Has anyone ever been approved for USDA loan before the general 3 year waiting period after a foreclosure? I list my job in 2009, therefor causing financial hardship (my name was also not in the house). Thanks! Hoping for some possibly good news!
Hi , I was wondering what and how the interest rates are for USDA rural home loans. How are they determined and how can you find out the latest present going rate?
Thank you
Hi Essie,
The rates are determined by the individual lender. According to the USDA website, “Fixed 30-year interest rates apply. Lenders and applicants agree upon interest rates.”
Hope that helps!
My wife and I are interested in this program. We have not talked to a lender yet, and they could possibly answer this question rather easily. We are currently living off of a single income and renting. My wife just received a job offer that would have her starting in 1.5 months. Her taking the job would require us to move since it is not within commuting distance for her. Right now we are living in an apartment and we don’t have a lot that we can put as a down payment at this time, and really don’t want to move to another apartment (although it is an option at this point). Once she starts working, our income will be higher than the limits for a USDA loan. If we were to go forward with a USDA loan, would it still be possible for us to qualify for this program?
Hi M,
First, congratulations on the additional income your wife will be bringing in.
I believe you answered your own question: her income will disqualify you for the USDA program, according to your estimation.
I would speak with a lender and get his or her take on the situation.
Best of luck to you both!
If I already have a USDA home loan. Can I purchase an additional property utlizing USDA again? I would like to find a farm (approx. 45 miles from my current location)and utilize that as a source of income, however, It would be used as a secondary home.
Erica,
My dream as well is to have a farm. . .hope you can make it come true. I just pulled up the latest USDA Guidelines and there are PAGES of changes just in the past few months.
Do you have the number of the Rural Development office in your region? If not, scroll down this page to my answer to Chimey’s question. In it you’ll see how to find it online. Your best bet is to call the rep and get the most up-to-date info.
Do me a favor? Come back and let us know about the farm. . .please?
Tim and/or Shannon:
Both of you are knowledgeable about these programs, and have offered valuable advice. Is there a way to contact either of you directly for other questions?
how long do you have to live in the home if through this loan program? Are you able to sell or rent out after a certain amount of time?
Hi Erin,
Great question. From what I understand the USDA program is for low to moderate income folks who plan to live in the home, not rent it out. That said, your question is “how long do I have to live in it?” I’m almost positive you can sell it sooner than you can rent it.
Your best bet is to go to the source: the Rural Development office in your region. I talk to ours here in Vegas all the time. . .really nice people that tend to put the rules, etc. in plain english! To find the one near you, scroll down until you find my answer to Chimey’s question. You’ll see how to find the rep in your area.
Good luck!
I am not sure about the difference between the USDA “Single Family Direct Homeownership Loans,” or “Single Family Guaranteed Homeownership Loans”. What are the basic differences between the two? Also is this process a little difference than the regular process of purchasing a home in that in a conventional process you are approved for a particular dollar amount without a particular home in mind and then you look with your realtor for a home that fits those finacial limits. It seems that in the USDA process you first find a home and then see if it qualfies for the USDA program and that you qualify for the dollar amount of the home? How does one begin the process and what are the steps going through it…in order? Sorry for such a long question, but our realtor is pushing us to consider this program and I am having trouble convincing my husband or explaining it to him. We like the no down payment option and the option to roll over the closing costs in the loan. Of the houses we have been looking at the down payment (we have qualified for an FHA loan with a 3.5% down option) and the closing costs (which seem huge here in NJ mainly because of the rule that a lawyer needs to be involved in the process and the inspectors charge so much), in comparison to our previous residence in Oregon…suck up a lot of our cash savings. My husband is not willing to put most of our cash into buying a home which would leave us without any cash reserve in case of an emergency. We would also like to only use his credit and income (which qualifies us for the FHA process) and leave me and my retirement income out of it. I love your advice…it’s the first time I have been able to even find the USDA site! The phone number our realtor gave us directed us to a firm called Evolve Bank & Trust. That was a little confusing for me…….
Chimey, it appears as if your real estate agent isn’t doing his or her job. That you have all these questions and that your agent gave you a phone number instead of providing you with the answers to your questions should be a red flag. FIRE THIS AGENT and find another one that will do his or her job.
That said, let’s look at the major difference between the two programs: A Section 502 guaranteed loan is provided and serviced by a traditional lender, but guaranteed by the USDA (much like HUD guarantees the FHA loan). The lender for the Section 502 direct loan is the FDA’s Rural Housing Service and Rural Development handles the servicing.
Yes, the process is a bit different from the typical home buying process in that the lender, if you choose the guaranteed loan, must be approved by the Rural Housing Service (RHS) and the home must meet approval as well. My suggestion is to contact the RHS rep in your area before house hunting to ensure you qualify. The representative will tell you how to proceed from there.
I am amazed that your “Realtor is pushing you” to go through with this process yet doesn’t seem to be lifting a hand to answer all of your questions. Again, I would seriously consider getting rid of this agent and finding a better one. New Jersey is loaded with competent, government loan savvy Realtors who would love to provide you and your husband with excellent customer service.
Here’s how to find the Rural Development office in your area:
Go to usda.gov
In the top navigation bar click on “Programs and Services,” and you’ll see a dropdown menu. Click on “Grants and Loans.”
On the new page, click on “Rural Development Loan Assistance.”
Under the first subhead, “Housing for Individuals,” click on “Rural Housing Guaranteed Loan.” The person you contact can help you with information about both the direct and the guaranteed loan.
Scroll to the bottom of this new page and, under the Basic Instruction heading, look for the “Rural Development” text link and click on it.
A new page opens with a map. Click on New Jersey. On the next page, click on your county. This will open a new page with the contact information for the Rural Development offices in your area.
Call the representatives and they will answer any questions you may have.
I do hope this works out for you and thanks for the thoughtful questions!
So, if my husband and I have our current house on the market but have not sold it yet, will we be able to apply for a usda loan?
Hi Pat,
It depends (don’t you hate that?). Typically, your current home needs to be under contract with a definite closing date. There are exceptions, however. One of these is if you are forced to move to accept a new job. When this happens, the old home is no longer considered to be “within the local commuting area” of your new job.
Don’t forget: the USDA loan has income requirements. Some of these include:
Not having sufficient resources to get conventional credit without a rural development loan guarantee
Your income cannot exceed the moderate income limits
Your best source of information on these programs is the USDA website.
Thanks for the question, by the way!
Hi there. I have looked into the qualifications needed for this loan and haven’t seen (until today) that you cannot own a home within commuting distance of the home you wish to purchase. I live in NJ and my boyfriend and I were going to tryto qualify for a USDA loan but my BF owns a home in the town in which we wish to buy (the current home does not suit our future needs size wise). Is that stipilation true? We were hoping to list the house he owns and buy a larger home in our same neighborhood.
Yes, it is true. Qualifications for this loan include that the applicant must
“NOT OWN A DWELLING IN THE LOCAL COMMUTING AREA.”
This is in addition to the income requirements and property eligibility requirements. Perhaps your best bet is to wait until after your boyfriend’s home sells to apply for a USDA loan, provided you meet the income requirements and the house you want to purchase is in an eligible area.
Best of luck!
According to the USDA ‘Eligible Areas’ map East windsor in NJ qualifies as a eligible area.
Does this mean any ‘single family’ house in East Windsor qualifies for a USDA ‘Guaranteed Loan’ scheme.
Or do we have to first find out if a given house is qualified ..although it is in a qualifying area.
Please advise.
thansk
Mohan
Hi Mohan,
The USDA website has a section in which you can enter the address of the property and they’ll let you know if it’s eligible. Follow these instructions to get to the web page:
Go to usda.gov
In the top navigation bar click on “Programs and Services,” and you’ll see a dropdown menu. Click on “Grants and Loans.”
On the new page, click on “Housing Assistance.”
Under the first subhead, “Housing for Individuals,” click on either the first or second link: “Single Family Direct Homeownership Loans,” or “Single Family Guaranteed Homeownership Loans,” depending on the program you’re interested in.
On the new page, look at the right side and click on the link named “Find Income & Housing eligibility.”
On the new page you’ll find the navigation bar on the left side of the page. Near the top, under “Property Eligibility” and “Programs,” click on “Single Family Housing.”
On the new page, click the “Accept” button.
In the top search box, just above the map, enter the address of the home you wish to purchase. A new page will appear telling you whether or not that home is eligible for the USDA loan.
Hope it works out for you!
I have one of these loans, and over the last 2 years have not been able to find any refinancing options available, due to the type of loan this is. do you know of any options out there? I work for one of the largest financial institutions in the world, and still I cannot find any refinancing options. Thank you.
Hi Ross,
The USDA has a 2-year pilot program for refinancing USDA rural loans, but only in select states. Since you don’t mention where you are, you’ll need to check to see if it’s available in your state: Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Rhode Island, South Carolina and Tennessee.
Then go to the USDA rural development website to find the phone number of the office in your state.
Hope it works out for you!
Sharon,
There are some lenders that will allow you to get money for needed repairs, as long as the home appraises for enough. No extras though just enough to get the home up to minimum HUD handbook guidelines.
You don’t want to buy a house with no down payment. I made that mistake two years ago, and barely avoided foreclosure. Just wait until you’ve paid down your student loans and you have at least 20 – 30% for your down payment. Besides given the current financial market, you’ll be hard pressed to find a lender willing to give you a loan without a significant down payment.. . When buying a house make sure the mortgage payment, insurance, taxes, and HOA is no more than rent for a comparable place. that way in case you want to move you can “ladder” the property. meaning you can rent it out and move elsewhere. The rent will cover the monthly expenses and you’ll benefit from any appreciation.
what credit score qualifies you for this program?
620-640 and you may be able to use non traditional credit such as cell phone bills, car payments, insurance, rent etc as long as you’ve been making the payments in good standing for over a year
I got approve for a usda home loan and i was told that the house has to be in good shape like walls, floors, no wood frame, and it takes a long time for usda to approve it is that true
I love this post! it’s so great. I learned a lot. I am interested in no money down loan. Thanks for finding this program.
I am wondering the same thing Sharon, if your approved for more than you actually paid for the house, can you use the difference, up to the amount approved, to fix the home up. Because, most foreclosed homes require new carpet and repairs.
Sharon,
You may also want to look into FHA 203k loans which provide funds for repairs and upgrades. Your state and city may also offer grants or assistance for updating your home or assisting with down payment and closing costs depending on your situation. When it comes to appliances you may also find it wiser to obtain financing elsewhere so that the debt is not tied to your home. Home Depot and other stores frequently provide no interest financing type deals on these items. However, be wary of having your credit pulled again or too many times before you close on your home or you could jeopardize your closing as your lender may check your credit score again.
i have a question, if i get a usda loan and purchase a forclosed home that needs new flooring and appliances, can i get a usda grant also to help with my cost of purchasing these items. i am on a fixed income and have been approved for this particular loan. thank you
I see this is from last June. Did you get an answer? I also am wanting to know.
Hi Sharon and Charlene,
Your best bet here is to contact your lender with the question. Or, you can also contact the USDA Rural Development Area Office serving your county. Either of these sources should be able to give you a more definitive answer, based on the location of the home and your particular circumstances.
Good luck!