Popularity for the USDA mortgage program is on the rise. This lucrative financing program used to be a little known program which got looked over by potential candidates. It was a shame, too, because the program allows for no down payment and flexible guidelines. Many borrowers assumed they had to live in a remote area with nothing around them since the program is for rural areas. Little did people know, the areas the USDA called rural were really not the rural they thought. Many of the properties are just outside of the urban areas where most people want to live. Because of this realization, many people are on the lookout for USDA homes for sale. USDA owned homes are homes which once had USDA financing on them, but the borrower defaulted. Here is a simple way to find these properties.
The USDA Website
On the USDA website, you can search for USDA owned homes. You can search state and then county. The website automatically populates the number of USDA homes for sale in each state and then each county. This gives you an idea of the homes available to you. Once you click on a specific property, you receive all of the information about the home. The website tells you:
- Price of the home
- Amount of the real estate taxes
- Style of the home
- Days it was listed
- The number of bedrooms and bathrooms
- The total number of rooms
- The square footage of the house
- Whether it has a basement
- Type of water supply
- Whether the home has air conditioning or not
Most of the homes you find for sale on the USDA website are much cheaper than the other homes in the area. The typical discount ranges between 25 and 40 percent depending on how much the owner defaulted on and how much the USDA needs to make back.
The Census and how it Affects Things
The census changes, as you probably know. This means the USDA boundaries change often. The USDA bases their boundaries on the latest population numbers. If an area which used to have USDA approval now does not, you can still purchase a USDA owned home in this area. The home gets grandfathered into the USDA approved area since the USDA owns the home and needs to sell it. This could help you if you want a specific home which used to be in the boundaries but now is not.
Qualifying for a USDA Loan
Qualifying for a USDA loan is rather simple. The USDA designed the program to help low-income borrowers. This means the less you make, the better off your chances of securing a loan with this program. This is true, of course, as long as you meet the debt ratio and credit score requirements. The first step, however, is to determine if your income qualifies you for the USDA program. You must determine your total household income. This is not just the income you and the co-borrower make; it is the total amount of money anyone over the age of 18 brings into the household.
The USDA does not take a gross amount, however. They do provide some allowances. If you have children either under the age of 18 or over the age of 18 but they are a full-time student, you can reduce your household income by $480 for every child. If you have elderly parents or relatives living with you, the deduction is $400 per adult and any disabled household members provide you with a $480 allowance. This money comes right off of the top of your gross household income in order to provide you with your qualifying income. You can then find where you fall with the USDA guidelines on their website after inputting your information.
No Down Payment
The largest benefit of the USDA loan is the lack of need for a down payment. When you do not need to put any money down, it is easier to qualify for the loan. In addition, it gives you a chance to put some money away for emergencies or even repairs you need to make on the USDA owned home. Oftentimes, foreclosed homes have issues which require your attention right away in order to provide you with safe and sanitary housing.
Be Prepared with USDA Homes for Sale
Because USDA homes for sale are a great deal, many people bid on them. In order to win the bid, you need to be prepared. Let’s say you win the offer, you have to be able to show the auctioneer the proof that you qualify for USDA financing. This means doing your homework ahead of time. You need to find a USDA approved lender and secure a preapproval, not just a prequalification. With a preapproval, the lender really goes through your file, ensuring they can provide you with funding.
Buying USDA homes for sale is a lengthy process, but well worth it in the end. If you can purchase a USDA home for a low price and secure the lucrative USDA financing, you have yourself a home which you can easily afford.