What is a USDA Guaranteed Home Loan?
A USDA Guarantee Home Loan is a government insured loan, which is issued and serviced by a lender. The loan is for rural areas, which is typically communities where the population is 25,000 people or less. You would be surprised at how many communities qualify. Rural does not mean out in the middle of nowhere. To see if a property you are interested in or listing qualifies, click here.
Are USDA Guaranteed loans only for low-income borrowers?
No, USDA Guaranteed loans are for Moderate Income borrowers. In most counties in California, as an example, a 1-4 person family can earn up to $74,050.00 per year, in some counties it is even higher, so the answer is that USDA Guaranteed loans are not only for those with lower incomes, but it is intended to be used by moderate income borrowers. For the exact income limit in your area, click here or email me, and I will let you know what that limit is.
What is the minimum FICO score needed for this loan?
In order to get a loan approved for USDA financing, you generally need at least a 620 Mid FICO score. I have had loans approved with scores lower than 620, but they are difficult to get approved, and underwriters generally do not approve anything below a 620 Mid FICO. If you have a 660 Mid FICO score or above, the loan allows for exceptions, such as higher DTI and housing ratios to be considered.
What are the Debt-to-Income (DTI) ratios required of this program?
The front end or housing ratio is 29% and the back end or total monthly debt ratio is 41%. This means that 29% of your gross monthly income can be used toward your total primary residence payment and your total monthly debt payments cannot exceed 41% of your total monthly gross income. If you have a 660 Mid FICO score or above, the loan allows for exceptions, such as higher DTI and housing ratios to be considered.
Are there restrictions as to where I can purchase a home using a USDA Guaranteed loan?
Yes, but there are a ton of available cities and communities that qualify for USDA Guaranteed financing. Typically the population needs to be 25,000 people or fewer to qualify, but that is not always the case. Cities such as
Do I have to be a first time homebuyer to qualify for a USDA Guaranteed loan?
No, you do not have to be a first time homebuyer to qualify for a USDA Guaranteed loan.
What is the down payment with a USDA Guaranteed loan?
There is no down payment. USDA Guaranteed loans offer 103.5% financing. 100% of the purchase price can be financed, as well as, the 3.5% Guarantee Fee that USDA charges all borrowers. I should mention that USDA allows for 103.5% financing of the appraised value…which is a great tool when trying to finance closing costs. Ask me how!
Can the property have an in-ground pool?
Yes, but the value of the pool cannot be financed. To make things simple, let’s say that the purchase contract for the home is $100K, the appraisal comes in at $105K and the pool is valued at $5K. In this example, you can still finance 100% of the purchase price without the pool becoming a factor in financing. If the pool is given no value it does not factor into the equation.
I have heard that USDA Guaranteed loans are difficult to qualify for and close, is this true?
Not in the least. USDA Guaranteed loans are one of the easiest loans to qualify for and they are relatively easy to close. A majority of my business focuses on USDA Guaranteed financing, and I have become an expert at qualifying and closing these loans. It is a great loan, and is a lot less cumbersome than VA or FHA loans. If someone has the option to qualify for USDA Guaranteed financing, they should definitely look at that option first.
I have heard that funds run out every year with USDA loans, what’s the deal?
There have been concerns with the availability of program funds for USDA Guaranteed home loans, but the funds are for the subsidized portion of the Guarantee Fee – which is now paid by the borrower directly, so this should not be an issue in the future. It is important to note that the USDA does not fund guaranteed loans; they provide insurance coverage (the guarantee) for the home loans that are then funded by approved banks. It is lender-driven program, and my broker relationship with the top USDA Guaranteed lender in the country allows me to continue to originate and fund USDA Guaranteed home loans when other banks may not. Proudly serving the entire State of
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George A. Nava Real Estate Loans
P.O. Box 1742
Brawley, CA 92227
Direct (760) 455-6373
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george@ivhomeloans.com