The USDA loan process works slightly different than any other loan because of the fact that the USDA Field Office must have the final say in whether or not the loan receives approval. The loan process begins the same as any other loan, but then concludes with the waiting period that is required while the USDA goes over the loan package.
The first step is to apply for a prequalification for a USDA loan. This helps to save you time in the long run because you will know what you do and do not qualify to receive. The lender will go over your credit and application to determine if you meet the USDA guidelines. During this period, the loan officer will ask you for:
- Personal identifying information to pull your credit to see if you are credit worthy
- Citizenship status
- Household income information
- Household expense information
This information will allow the loan officer to determine if you fall within the USDA guidelines. The loan officer will be able to determine at this point if your credit is either too high or too low to qualify for the program as well as if your credit qualifies you for the program. The prequalification is not a guarantee of an approved loan, but it can give you a good idea of the amount of home you can afford if you do get preapproved.
Once you find a home and are ready to get final approval on your USDA loan, you will go through the official application process. During this process, you will validate everything that you told the lender during the prequalification process. This means you will provide official documents for your income and expenses. This is also the time that an appraisal will be ordered to ensure that the house meets USDA guidelines. This is an in-depth look at your qualification factors before your file gets sent off to the USDA office.
A few key areas you need to focus on include:
- Income needs to be within 115% of the area’s limits, which you can find here
- The property needs to be within the rural areas determined by the USDA
Once these factors are approved, the lender will order the appraisal from a USDA approved appraiser. After everything is with the underwriter, he may ask for a few more items to finalize your file to prepare it for send off to the USDA.
The Final Step of the USDA Loan Process
The final step of the USDA loan process is the final review by the USDA. This process can take a few weeks, which is why it is important to have all of the necessary documents to the underwriter as quickly as possible. The lender is required to send a complete package to the USDA or it will delay the process even further. Once the USDA approves the file, it is ready to close.
Closing the USDA Loan
At the closing, you will sign numerous documents including the mortgage note and mortgage deed. You will also be required to bring any cash to the closing that is required for your loan. Once everything is signed, the loan will fund and you will be free to move into your new home.
The USDA loan process works in the same manner as most other loan programs with the exception of the delay that occurs while waiting for the USDA to approve the loan. If you work with a USDA lender that is well versed in the USDA requirements, the process should go smoothly as the lender should be able to tell ahead of time what will and will not get approved.