USDA Loan Basics is a post from: USDA Loan

The USDA loan program has become popular as other mortgage loan programs have been harder and harder to qualify for – and not just because the USDA loan program is a no-down-payment loan program.  There are other USDA loan advantages (such as no mortgage insurance) that have made this a popular choice for many homeowners who are looking to buy a home.

As with any loan program, there are some basic things about the USDA loan program that if you know them and can be informed about how the program generally works, then you can lean on your loan officer at your USDA lender for the rest of the information.

USDA Loan Program Basics

• USDA loans are always a fixed rate, there are no ARM options with the USDA loan program
• You can buy any home as long as it qualifies under the USDA loan qualifying area
• Generally speaking, the USDA loan program doesn’t “like” manufactured homes
• The minimum credit score for a USDA loan is 620
• The USDA Loan income limits vary by geographic area
• If you have more than 4 people living in the home, the USDA loan income limits also grow
• A seller can contribute to closing costs with a USDA loan

As the housing market turns down and more people are looking to buy a their first home, many people are discovering that the USDA loan program is a great option.  Before you speak with a loan officer, just make sure that you know these basics and then the USDA lender can help you get more information as needed.

Speak with a USDA loan officer today about whether or not this program is right for you.

USDA Loan Advantages is a post from: USDA Loan

The USDA loan is quickly becoming a favorite because of the true no money down options, but did you know that there are really about 6 true “advantages” to the USDA loan over other loan options.

6 USDA Loan Advantages

• The USDA loan is a true no-money-down loan
• The USDA loan doesn’t have monthly mortgage insurance which saves you money each month on your mortgage payment
• The USDA loan doesn’t have a maximum loan limit like FHA and conventional loans
• You don’t need to have saved up a down payment in order to qualify for a USDA loan
• It is possible to get your earnest money back at closing with a USDA loan
• Qualification for the USDA loan is typically easier than conventional or even FHA financing

With the changes in the FHA loan programs over the last few years, many people are finding that FHA loans are getting tougher to qualify for and have raised the minimum credit scores as well as other qualifying criteria. Conventional loans are also getting tougher to get – and the one program that has remained pretty much the same is the USDA loan program.

So if you are in the market to buy a house, don’t have a lot of money to put down and want to see what your options are: the USDA loan program is going to be hard to beat.

Contact a USDA loan expert to see what your USDA loan options are today.

Income Rules to Live By When Using A USDA Loan To Buy A House is a post from: USDA Loan

Many mortgage programs, or financial programs in general, seem to have some type of guideline that centers around income limitations that must be met in order to qualify.

For example, if you are in the market to buy a home in a rural area you may qualify for a USDA loan provided your income does not exceed the income limits for the program given the area where you are looking to buy. Similarly, there are income limits for Roth IRAs that limit your participation in making contributions if your adjusted gross income exceeds the program’s guidelines.

The USDA loan program is designed to help out low to moderate income home buyers living in rural areas. While the program guidelines are the same for all applicants throughout the US, there are some differences in how much money you can make based on the geographic area you are looking to purchase a home.

Essentially the USDA loan program works with two versions of your income: the eligibility income and the adjusted income. Eligibility income is basically your gross income which is compared to your debts in order to calculate your debt to income ratio. The eligibility income has nothing to do the income that USDA looks at to determine if you qualify for the program.

The income that USDA looks at to determine if you are “low to moderate income” is your adjusted income. This income takes into account income deductions for dependents living in your care as wells as students that are you dependents and even medical expenses and child care expenses. Basically your USDA lender will adjust your income down to account for any of these situations and others that apply.

With adjustments down in your income qualifying for a USDA loan may be easier than you think. Talk with a USDA lender to determine your eligibility for this 100% financing loan.

USDA Loans: Can You Do Escrow Holdbacks With USDA Loans? is a post from: USDA Loan

One of the more common questions we get for homes that need a few repairs and are being financed by the USDA loan program is:

Do you allow escrow holdbacks for repairs with the USDA loan program?

Escrow holdbacks are common with other types of loans and many people are curious if the USDA loan program allows escrow holdbacks.

And the answer is…

When proposed exterior repairs cannot be completed because of weather and the work remaining to be done does not affect the livability of the dwelling, an escrow account for only exterior work may be established if the following conditions are met:

• A signed contract and bid schedule is in effect for the proposed exterior work.
• The contract for the work must provide for completion within 120 days.
• A final inspection report must be obtained and Rural Housing and Community Development Service must be notified when the work is completed.
• The escrow account must be funded in an amount sufficient to assure the completion of the remaining work. This figure should be 150% of the cost of completion, but may be higher if it is determined a higher amount is needed.

So can you do escrow holdbacks with the USDA loan program? Yes. Under certain conditions.

USDA Loan Income Verification Requirements is a post from: USDA Loan

One of the more popular questions we get when people apply for a USDA loan is:

What kinds of income verification requirements are required for the USDA loan program?

And many people tell us that they seem reasonable. Remember – the goal of the USDA loan program is to put eligible borrowers into a great loan program.

When getting a USDA loan, the following income documentation requirements apply:

• A signed & dated IRS 4506-T completed at application and closing is required for all borrowers.
• Receipt of tax transcripts for the prior 2 years must be obtained prior to closing and compared to the borrower(s) income used in qualifying. These transcripts must be included in the loan file delivered for purchase. (Also, see “Income Verification” additional information on IRS transcripts.)

In addition, USDA allows the following as possibly eligible for alternative forms of documentation:

• If no VOE is available, applicant income may be verified by W-2 tax forms for the previous two tax years, telephone verification of the applicant’s permanent employment, and one of the following:
–paycheck stubs or payroll earnings statements covering the most recent 30-day period
OR
–Electronic or computer-generated verification of earnings for the most recent 30-day period.

• If both the borrower and all co-borrower meet the minimum 620 credit score requirement:
–Documentation of rent payment history is not required.
–Documentation of adverse credit history waivers is not required, except for those involving a delinquent Federal debt or previous RHS loan.
–No action is necessary for any derogatory items, except for those involving a delinquent Federal debt or previous RHS loan.

From time to time income documentation requirements change, but one thing is certain — you can expect them to remain directed toward the same goal… putting qualified people into the USDA loan program.

USDA Loans: Wells and Septic Systems is a post from: USDA Loan

If you are thinking about getting a USDA loan, make sure that the well or septic system meets USDA loan guidelines.

The distance between the well and the septic system and the home must be verified, if applicable. An FHA Roster appraiser, a government health authority, licensed septic system professional, or a qualified home inspector may perform the septic system valuation.

The separation distances between well and septic tank, the drain field and the property line should comply with HUD guidelines or state well codes. HUD guides state a domestic well must be a minimum of 50’ from the septic tank, 100’ from the septic tank’s drain field and a minimum of 10 feet from any property line.

The appraiser can provide a map if requested by the underwriter.

For any property in which the lender or the FHA Roster appraiser is in doubt about the operation of septic systems for the dwelling or in the neighborhood (e.g. if the property is vacant), the local health authority or state certified laboratory must perform a water quality analysis. The water quality must meet state and local standards.

And finally, if you have questions about the water quality meeting state and local standards, you can contact the EPA’s Safe Drinking Water Hotline at (800) 426-4791.

USDA Loan Refinancing is a post from: USDA Loan

Can you refinance a USDA loan?

Yes.

But in order to qualify for a USDA loan refinance, you must meet certain criteria.

The first qualification in order to refinance into the USDA loan program is that you must currently have a USDA loan. If you don’t have a USDA loan currently, then you cannot refinance into a USDA loan. When refinancing from a USDA loan into another USDA loan, it can be quick and easy as there is no property inspection required to do a USDA refinance.

Other USDA Refinance Requirements

• The loan being refinanced must be a USDA loan
• The USDA loan must be current
• The new USDA loan must result in the monthly principal and interest payment being lowered
• No cash out allowed

While it is true that there is no maximum loan amount with the USDA loan program, the maximum loan amount that you can qualify for depends on your debt ratios.  The new mortgage payment can’t be more than 29 percent of your gross monthly income and your total debt ratio cannot exceed 41%.

Your total monthly income must also meet the maximum allowable criteria – and the criteria varies by area and your loan officer can easily help you find that number for your area.

In addition to income requirements and debt to income requirements, the maximum amount allowed to be financed is 102% of the appraised value of the home. USDA allows 102% currently but this amount may rise – it hasn’t been released yet.

Thinking about refinancing your USDA loan? Be sure to work with a USDA loan expert, there are many things about the USDA loan program that are “different” from a traditional mortgage.

USDA Loans: Calculating Your Income is a post from: USDA Loan

When applying for a USDA loan, it is important that you calculate your income correctly. USDA loans have a maximum amount of income that is allowed in order to be eligible for the program and sometimes it can be confusing to figure out what counts and what doesn’t.

USDA Loan Income Calculation Guidelines

The borrowers adjusted income may not exceed 115% of the U.S. median income. If Bond financing is involved, the borrowers income cannot exceed the lesser of 115% area *median income or income limits specified by the Bond Program.

The following are included in annual income to qualify for a USDA RHS guaranteed loan:

• Gross amount of wages, salaries, overtime pay, commissions, fees, tips, bonuses and other compensation for personal services of all adult members of the household.
• Net income from the operation of a farm, business or profession, interest, dividends and other net income of any kind from real or personal property.
• Payments from social security, annuities, insurance policies, pensions, unemployment, workers compensation, alimony and/or child support and other types of periodic receipts.
• All regular pay, special pay and allowances of a member of the armed forces who is the borrower or spouse whether or not that family member lives in the unit.

The following sources are not included in annual income but will be considered in determining the ability to repay the loan:

• Income from minors.
• Food stamp allotment.
• Payments from foster care.
• Irregular cash gifts.
• Lump sum additions, such as capital gains, etc.
• Medical reimbursements.
• Educational benefits.
• Hazardous duty pay for military person exposed to hostile fire.
• Income exempted by Federal Statue.

Adjustments to reduce annual income include $480.00 for each minor child, full timestudent or a disabled member of the family. $400.00 may be deducted from the annual income for each family member over 62 years of age. An additional deduction may be calculated for certain expenses when added together exceed 3%of gross annual income.

USDA Loan Guidelines: Common Questions is a post from: USDA Loan

When it comes to USDA loans, many times people have questions on underwriting guidelines. Here are few of the more common questions and answers when it comes to USDA loan guidelines:

Question:
How long after a bankruptcy can someone qualify for a USDA loan?

Answer:
Bankruptcies are not allowed in the last 36 months.

Question:
Can you get “cash back” at closing with a USDA loan?

Answer:
The borrowers may not receive any cash back at closing, other than the documented amount representing costs paid in advance by the borrower from their personal funds (i.e., earnest money deposit, appraisal, credit report fees). Tax pro-rations may not be given to the borrowers in the form of cash back at closing. Any tax prorations resulting in cash back to the borrower must be applied as a principal reduction. The same applies to any excess funds remaining from seller paid concessions.

Question:
When it comes to child care expenses when qualifying for a USDA loan, what is allowed?

Answer:
A deduction of the care of minors 12 years of age or under, to the extent necessary to enable a borrower to be gainfully employed or to further his/her education. Payment of care cannot exceed the income earned, if caused by employment and cannot be made to persons whom the borrower is able to claim as a dependent for income tax purposes. Documentation may be in the form of tax returns, third party verifications or cancelled checks or money orders.

Question:
Are co-borrowers allowed on a USDA loan?

Answer:
Allowed. The maximum number of borrowers allowed on a single transaction is four. Income from all borrowers and non-borrowers occupying the subject property must be considered when calculating qualifying income.

Question:
Do I have to pay off collection accounts when qualifying for a USDA loan?

Answer:
Applicants are expected to demonstrate a reasonable ability and willingness to meet obligations as they come due. It is the underwriter’s responsibility to determine what collection accounts, if any, should be paid in full by the applicant prior to or at closing, and based on the strength of the credit profile. Evidence of meaningful financial reserves and if the account(s) have the potential to affect the lien position or diminish the borrower’s equity must be considered. The underwriting decision must be fully documented on the underwriting analysis.

Question:
What kind of credit history do I have to have to qualify for a USDA loan? Can I qualify for a USDA loan with bad credit?

Answer:

Credit history must indicate a reasonable ability and willingness to meet obligations as they become due. The following are indications of unacceptable credit history and must be carefully investigated. If loan approved through GUS, the guidelines below are not required to be met.

• More than one payment being more than 30 days late in the last 12 mos.
• A foreclosure or bankruptcy in the past 36 months.
• A judgment in the last 12 months.
• Outstanding tax liens, mo matter what their age, that are currently delinquent.
• Two or more rent payment paid 30 days or more past due.
• Outstanding collection accounts, mo matter what their age, that are currently delinquent.
• Previous RHS debt or non-RHS debt that resulted in a loss.
• Any outstanding judgment obtained by the United States in a federal court (other than a tax lien).

These are just a few of the more common questions that we get about qualifying for a USDA loan. If you have questions about your particular situation, be sure to call one of our experts!

USDA Loans Are Back! is a post from: USDA Loan

The USDA loan program is back!

The USDA Guaranteed loan program is back and people can now get USDA loans subject to ““the availability of funds and statutory authority to obligate such funds to support the proposed guarantee, the statutory authority to charge a sufficient guarantee fee (if any is needed, to support the proposed guarantee with available funding), and should the lender pass on to the borrower a loan origination fee that is higher than the guarantee fee that RHS is ultimately authorized to charge on the proposed guaranteed loan, the lender agrees to promptly return the difference to the borrower.”

This means that your lender can now take your USDA loan application, issue a conditional commitment and expect that your loan can get funded.  One update to the program is that there is a new 3.5% guarantee fee – but for people who have been unable to get USDA loan financing at all, this increased fee is a small concern.

A few highlights about the USDA loan program:

Here are a few things to remember about USDA 100% loans:

• There is a 3.5% USDA fee that can be rolled into the loan amount
• There is no monthly PMI
• USDA loans are only good for a primary residence
• USDA loans are income capped based on the county
• A minimum 620 credit score is required
• Only certain homes qualify for USDA loans, depending on location

The USDA loan program is more popular than ever – and going into 2010 and 2011, it looks like the USDA loan is going to be a popular choice among borrowers.