One of the least known, most misunderstood, yet beneficial mortgages is a USDA Guaranteed home loan. Many think of USDA Rural Development Guaranteed Loans for very low income, small purchase prices, and only for properties way out in the country. Not today’s USDA! Conversely, most U.S. properties are eligible, and middle-income families often meet income limit requirements. Additionally, USDA loans are flexible when it comes to credit scores. Scores could be as low as 620. An important upcoming factor for some areas effective June 4, 2018, is that USDA property eligibility map changes take effect.
Why Use a USDA Guaranteed Loan?
As mentioned, this is one of the most misunderstood, yet valuable home loans. It is an especially attractive option for first-time buyers looking for a no money down purchase. Plus, many don’t realize subsequent buyers may even use USDA.
Just think, if buying a home and the buyer wants to purchase with no money down, has a 620 – 850 credit score, desires the seller pay all buyer closing costs, as well as have a fixed principal & interest payment. USDA guaranteed loans offer exactly these type of scenarios. USDA benefits include:
- 30-Year Fixed Rate
- No Money Down Purchase
- Lowest mortgage insurance & funding fee of government loans
- Seller paid costs to 6% of the purchase price
- Down to 620 credit scores
Sounds attractive, doesn’t it? Well, an OVM Financial loan officer will be glad to discuss USDA and other mortgage options with you.
USDA Property Eligibility Changes
One of the foremost requirements for these home loans is the property must meet USDA property eligibility requirements. When looking for USDA eligible homes, you need to be outside the orange shaded areas on the map. Also, if looking at properties close to the eligible/ineligible lines, make sure to search by a specific address. This is the same way lenders verify the eligibility directly with Rural Development.
USDA Eligibility Deadline
If you are cutting it close to the June 4th deadline, it is important to understand the rules of the change date. First of all, the property must be in an eligible area. If purchasing a home that changes from eligible before June 4, 2018, to ineligible afterward, the loan may still be approved if all of the following conditions are met:
- Signed, ratified purchase contract dated before June 4, 2018
- Loan application date with property address before June 4, 2018
- Loan Estimate issued by the lender within three days of application date
- The applicant meets all other USDA eligibility guidelines
Is Your Area Affected By the Proposed Ineligible Area Changes?
When there are upcoming changes to USDA property eligibility areas, Rural Development will add a temporary tab called “proposed ineligible areas.” This interim search feature allows buyers, Realtors, builders, and lenders to see how the changes may affect affordable financing in their areas.
USDA Household Income Limits Updated for 2018 – 2019
Besides property eligibility and underwriting guidelines, USDA has a maximum income limit. Plus, it does not go by borrower income. Rather, it goes by the total household income.USDA divides the income limits into two categories: 1 – 4 person household and 5 or more person household. Typical limits include:
- 1 – 4 person household = $82,700
- 5+ person household = $109,150
However, many county limits exceed these amounts. Plus, there are tricks to exceed the USDA income limits. Check with your OVM Financial loan officer even if over the limits. There could be a solution!
An important takeaway from this article should be that USDA is an incredible home buying option for many buyers. It is creative, affordable, and we are experts at them. If USDA is not an option, there are other ways to become a homeowner that include FHA, VA, conventional, down payment assistance, renovation loans, and more.