Buying a home using a USDA loan? Lucky you! A USDA home loan is one of the best options for buyers today. Not only is it a no money down program, but it also provides affordable monthly payments. Furthermore, it isn’t just for first time home buyers. Sounds pretty good, doesn’t it? But wait, there is a potential glitch during one time of the year where USDA funds availability is an issue.
Spoiler Alert! We have a solution for you at the end.
For several years now, USDA funds availability has a gap after each fiscal year. The USDA fiscal year runs from October 1 through September 30th each year. Typically, USDA is out of funds for about 2 weeks starting October 1. In order for the USDA Rural Development program to exist, it needs government funding. Regretfully, USDA is an annual victim of last-second government negotiations. So, during this period USDA only offers conditional commitments but will not provide the funds to lenders. No funds usually means no closing.
No USDA Funds Availability Causes Purchase Delays
The good news from above is that USDA is still issuing conditional commitments to lenders. The USDA conditional commitment allows lenders to close a borrower’s USDA loan. Basically, USDA says “If you get us these items, we will guarantee the loan.” The bad news is most lenders do not want to take the risk of closing a USDA loan without USDA providing the funds. Even though the funds should be available within a couple of weeks, many lenders will not go there. So, what do you do if you have a closing coming up during the first half of October? Bad options include:
- Delay the closing 2 weeks or more?
- Change loan programs with higher rates or larger down payments?
- Miss out on the house you want?
Let’s hope not! That’s why we are providing this message today. Hopefully, it helps a lot of buyers use the benefit of a USDA loan for that dream home.
USDA Funds Availability 2018 Solution
I can’t tell you how many people this catches off guard. Even mortgage lenders! Do you have a USDA file looking to close at the end of September or in October? Being able to set a closing date and meet it is key. Just think, there are so many things that depend on the buyer closing on-time. These include scheduling a moving truck, negotiating with a seller, seller buying another house, putting a notice to a landlord, job relocation, rate locks, and much more.
OVM Financial Will Fund USDA Loans in October!
We promised you better news! OVM Financial will close your file even during USDA’s period of no funds. Worried about your current lender closing during this time? Take the first step to help your buyer get to closing on-time! Avoid uncertainty with another lender and contact us now.
USDA Loan Benefits
Why not switch programs during this USDA funds availability gap? We have 8 reasons!
- Credit scores down to 620
- Use higher appraised value to finance closing costs
- Seller may pay up to 6% of the price in costs
- First-time buyer or subsequent buyer
- Flexible income limits
- Stick built homes, off frame modular, townhomes, approved condos
- May own another home over 1 hour away
- Biggest is NO DOWN PAYMENT!
USDA Loan Income Limits
As we mention in other USDA articles, there is the misconception about USDA income limits. Many think this is just for the very low-income borrower. Although it will allow for low-income households, it also provides financing for middle-income families. Check out how the 2018-2019 income limits come in at very liberal amounts. USDA income guidelines include the following:
- $82,700 for 1 – 4 household members
- $109,150 for 5 or more household members
- Higher amounts allowed in certain counties
- Exceptions to exceed income limits
These limits cover most American households.
USDA Property Eligibility
Another requirement is the USDA property eligibility. Like the income requirement, this is very liberal as well. Although highly populated areas typically do not qualify, most of America does. Also, the loan amounts may go up to the conforming loan limits which start at $453,100.
Recently USDA changed the property eligibility map which shows eligible versus ineligible areas for borrowers. In order to obtain a USDA Rural Development loan, the property must be located in a USDA eligible area.