USDA loans offer 100% financing to low to moderate-income families that live in rural areas. This can be a great way for you to get a loan, but there’s a catch. The USDA has the final say in whether you get the loan approval. This means your paperwork must be in order and current in order for the USDA to process your loan.
Just what paperwork do you need for the USDA loan? Keep reading to find out what you need.
Proving Your Income
First, you must prove your income to the USDA. In fact, you must prove it long before you even apply for the loan. The USDA needs to see that you are eligible for the program. In other words, they need to see that your total household income doesn’t exceed their guidelines.
In order to prove your income, you must provide the following:
- Paystubs that cover the last 30 days of employment
- W-2s for the last 2 years
- Tax returns for the last 2 years if you are self-employed
- Award letters for any social security or retirement income that you receive
Each member of your household must provide these documents. This is how the USDA determines your eligibility. They take the total household income of every adult in the house (including teens ages 18 and over that work full-time).
From that income, the USDA will give you some allowances as follows:
- $480 for every child under the age of 18
- 480 for every child over the age of 18 but that is a full-time student
- $480 for every disabled person living with you
- $400 for every elderly person living with you
Once the USDA has your ‘bottom line income’, they can determine if you are eligible for the loan. If you are, the USDA will need the above income documents to qualify you for the loan.
Proving Your Assets
You’ll also need to provide ample proof of your assets. Typically, the USDA wants asset statements for the last 2 months. This gives them ample proof that you have the funds that you need to close on the loan. It also lets them see if there are any large deposits that they may have to investigate to ensure that you don’t have any other loans.
Make sure that when you supply your bank statements, that you supply all pages of each statement, even if they are blank. This is a crucial step to ensuring that your loan gets processed quickly.
Purchase Agreement and Appraisal
The USDA will also need a signed and executed purchase agreement for the property you want to purchase. The contract must be signed by all parties and dated accordingly. The contract must include all of the important information including the property address, purchase price, and any concessions or negotiations both you and the seller agreed on before signing the contract.
The USDA will also need an appraisal done to USDA standards. The USDA has specific property requirements that they need covered. Not only does the home need to be ‘rural’ according to USDA guidelines, but it must also be safe, sound, and sanitary. The USDA has minimum property requirements that the property must meet in order for it to pass for their financing.
Basically, the USDA needs a full underwriting package. They don’t want you to send in one paystub and one W-2 one week and then the other documents another week. They only accept full underwriting packages and they only receive it after the underwriter approves the file first. It’s the underwriter’s responsibility to ensure that every document that the USDA needs is in there for the most efficient turnaround time.