- What is a USDA Loan?
- Who is Eligible for a USDA Loan?
- What are the Benefits of a USDA Loan?
- How to Get Approved for a USDA Loan
If you’re hoping to get approved for a USDA loan , there are a few things you can do to increase your chances of success. Read on to learn more.
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The U.S. Department of Agriculture’s (USDA) Single Family Housing Guaranteed Loan Program (GUARANTEED) helps low- and moderate-income families obtain affordable, safe and sanitary housing in eligible rural areas by providing them with direct loans or guaranteeing loans made by approved lenders.
USDA rural development staff members work in partnership with private sector loan officers to evaluate, approve and monitor all loan guarantees. The program currently operates in 46 states, serving approximately 97 percent of the nation’s population.
To be eligible for a USDA GUARANTEED loan, applicants must:
-Meet citizenship or eligible non-citizen requirements
-Have the legal capacity to incur the loan obligation
-Be a U.S. citizen, Non-citizen national or qualified alien
-Occupy the dwelling as their primary residence
-Have not been suspended or debarred from participation in federal programs
-Demonstrate the willingness and ability to repay debt obligations as they come due
What is a USDA Loan?
A USDA loan is a type of mortgage loan backed by the United States Department of Agriculture. USDA loans are available to homebuyers with low-to-moderate incomes, as well as those with limited incomes in rural areas. These loans are designed to promote homeownership in areas that are underserved by the conventional lending market.
Who is Eligible for a USDA Loan?
In order to be eligible for a USDA loan, you must meet certain criteria. For starters, you must be a US citizen or a legal permanent resident. You must also have a steady income and good credit history. Finally, you must be looking to buy a property in a rural area designated by the USDA. If you meet all of these criteria, you should have no problem getting USDA loan approval.
What are the Benefits of a USDA Loan?
The United States Department of Agriculture (USDA) offers a loan program commonly known as the USDA Rural Development Guaranteed Housing Loan Program, or just USDA rural loans. Approval for these loans is income-based, meaning that as long as you meet the income guidelines for your area, you will likely be approved for financing.
There are several benefits to USDA rural loans that make them a great option for homebuyers who meet the income requirements. First, there is no down payment required, which can make homeownership more affordable for lower- and moderate-income families. Additionally, USDA rural loans come with low fixed interest rates, meaning your monthly payments will be predictable no matter what happens with market interest rates. Finally, these loans are available for homes in eligible rural areas, which means you may be able to buy a home even if you are not in an urban area.
How to Get Approved for a USDA Loan
A USDA loan is a loan offered by the United States Department of Agriculture for those looking to purchase a home in a rural area. The great thing about these loans is that they offer 100% financing, which means that you do not need a down payment. In order to get approved for this type of loan, there are a few things that you need to do. Keep reading to learn what you need to do in order to get approved for a USDA loan.
Check Your Credit Score
Your credit score is one of the most important factors in whether or not you’ll be approved for a USDA loan. In order to get an idea of where you stand, order a free copy of your credit report from AnnualCreditReport.com. You’re entitled to one free report from each credit reporting bureau every year, and you can get them all at once or spread out throughout the year.
Once you have your reports, go through them carefully to identify any errors. If you find any, dispute them with the credit bureau in question. Getting erroneous information removed from your report can help improve your chances of getting approved for a USDA loan.
In general, you need a credit score of 620 or higher to qualify for a USDA loan. However, some lenders may have stricter requirements, so it’s always a good idea to check with several lenders before decides which one to work with.
Meet the Income Requirements
In order to get approved for a USDA loan, you must satisfy the income requirements for the County in which you want to purchase a home. You can do this by meeting the “qualifying income limit” for that county. The qualifying income limit is 115% of the area’s median income.
To see what the income limits are in your desired area, go to http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do and select the appropriate county on the map. Once you’ve done that, scroll down to the “Income Eligibility” section and you will see both the “Household Income Limits” and the “Qualifying Income Limits” for that county.
The next thing you need to do is make sure your household income falls at or below the qualifying income limit for your desired county.Keep in mind that your household income is not just your personal income – it is all of the incomes of everyone who will be living in the home with you (spouse, children, roommates, etc.).
If everyone’s combined incomes fall at or below 115% of that county’s median income, then congratulations – you likely qualify for a USDA loan!
Prove Your Citizenship
To get approved for a USDA loan, you must prove your U.S. citizenship. You can do this by providing a copy of your birth certificate, passport or naturalization papers. If you are not a U.S. citizen, you may still be eligible for a USDA loan if you have permanent resident alien status.
Have Sufficient Funds for a Down Payment
Before you even start the pre-approval for your USDA Loan, make sure that you have saved up enough money for a down payment. The down payment for USDA Loans is set at a minimum of 3%. There are some circumstances where a higher down payment may be required, but this is rare. If you do not have the minimum amount required for the down payment, then you will need to wait until you have saved enough money to make the down payment before you can start the pre-approval process.
Find a Property in an Eligible Location
To get approved for a USDA loan, find a property in an eligible area as defined by the USDA’s Rural Development website. You can check eligible addresses by visiting the Rural Development Eligibility Site. Once you enter your address, the site will show you if the property is located in an eligible rural area.
Get a Home Inspection
To get a USDA loan, you’ll need to satisfy the credit and income requirements of the program, and also undergo a home inspection.
USDA loans are available to moderate- and low-income homebuyers in areas designated by the U.S. Department of Agriculture as rural. The USDA designates certain census tracts as rural based on population density, and loans are not available in areas with extremely low populations or high unemployment rates.
In order to qualify for a USDA loan, your household income must not exceed 115% of the median income for your area. In addition, you must have a credit score of 640 or higher to qualify for a loan. If you do not meet these requirements, you may still be eligible for a USDA loan if you can provide proof of alternative credit or meet certain other requirements.
Once you’ve met the basic eligibility requirements for a USDA loan, you’ll need to undergo a home inspection in order to get final approval for your loan. The purpose of the home inspection is to ensure that the property meets minimum standards for safety, habitability, and structural soundness.
A home inspector will examine the condition of the property’s exterior, structure, appliances, plumbing, electrical systems, and more. If any repairs are needed in order to bring the property up to code, the buyer will be responsible for making them prior to closing on the loan.
After the home inspection has been completed and all repairs have been made (if necessary), your loan will be approved and you’ll be able to close on your new home!
Apply for the Loan
Applying for a USDA loan is a multi-step process. The first step is to contact a USDA-approved lender and submit a loan application.
Your lender will review your credit history, employment history, and current financial situation to determine if you qualify for a USDA loan. If you do, they will issue a pre-approval letter.
With your pre-approval letter in hand, you can start shopping for a home that meets the USDA’s eligibility requirements. Once you find a home you want to buy, your lender will work with you to complete the loan application process.
The next step is to get an appraisal of the property you want to purchase. The appraised value must meet or exceed the purchase price in order for the loan to be approved.
Once the appraisal is complete, your lender will submit the loan application and supporting documentation to the USDA for final approval. If everything goes smoothly, you should receive your loan approval within 10-15 days.
If you’re hoping to get a USDA loan, you shoud know that not all homes are eligible for financing. In order to meet USDA loan requirements, your home must:
-Be located in a designated rural area
-Fall below the maximum income limit for your area
-Be in good repair
-Meet energy efficiency standards
If you can meet all of these requirements, you’re likely to be approved for a USDA loan.