USDA LOAN - HOME BUYER CHECKLIST

USDA INCOME AND GEOGRAPHIC ELIGIBILITY GUIDELINES - GENERAL

Must be in an eligible USDA Rural Development Location. To determine if the property is in an eligible USDA area follow these instructions:
 
Go to the USDA Rural Development Website
On the left hand side tool bar, under "Property Eligibility", click "Single Family Housing"
Click "Accept"
Enter property address to determine if a specific house is located in an USDA eligible area
County specific income guidelines. Reference the USDA website for adjusted household income limits

BORROWER SPECIFIC

Borrower Type Allowed
 
U.S. citizens
Permanent resident aliens
First time home buyers allowed
Non-occupant co-borrowers NOT allowed
Loan Amount – Minimum & Maximum
 
Minimum loan amount: $80,000. (Note, this is an internal lender guideline. The USDA Loan program has no minimum loan amount guideline. If you are purchasing a house with a price less than $80,000 contact other lenders to determine if they will service your mortgage requirements.)
Maximum loan amount: No limit. The maximum loan amount that a borrower can qualify for will be determined by the borrowers debt to income ratio and Guaranteed Underwriting System’s findings
Minimum Credit Score
 
Middle Credit Score - 640 for each applicant for GUS automated underwriting approval
Middle Credit Score - 620 for each applicant for manual underwriting approval and a documentable rent history within the last 12 months.
Multiple Property Ownership
 
USDA Rural Development often won't allow applicants to own other properties
Exceptions include when the other property owned is:
Not owned in the local commuting area as the new property;
Not structurally sound and/or functionally adequate
Manufactured home not on permanent foundation
Qualifying Ratios
 
29/41% debt-to-income (DTI) - Target
34/46% debt-to-income (DTI) - With compensating factors such as:
680 or higher credit score
No or low "payment shock" - less than a 100% increase in proposed mortgage payment Vs. current rental housing expenses
Fiscally sound use of credit
Ability to accumulate savings
Stable employment history with 2 or more years in current position or continuous employment history with no job gaps
Cash reserves available for use after settlement
Career advancement as indicated by job training or additional education in the applicants profession
Trailing spouse income - as a result of a job transfer, the house is being purchased, prior to the secondary wage-earner obtaining employment. If the secondary wage-earner has an established history of employment and has a reasonable chance to obtain new employment in the area
Low total debt load

OBTAIN A LOAN PRE-QUALIFICATION LETTER

At Bridgeview Bank Mortgage our focus is on getting USDA Loans approved. This means Bridgeview Bank Loan Officers will perform a high level of due diligence when pre-qualifying a borrower for a mortgage, which includes:

Obtaining a credit report from all three credit bureaus
Verifying income documents, including W-2’s for the last two years, recent paystubs, and tax returns for the last two years if the borrower is self employed
Verifying asset documents for the last two months
Preliminary approval is run through USDA Guaranteed Underwriting System or GUS

Prior to issuing a loan pre-qualification letter, at a minimum the Loan Officer should verify the following:

Full tri-merge credit report
Income verification which includes paystubs and the last two years of W-2 statements
For self-employed borrowers full review of previous two years of tax returns
Application processed through USDA Guaranteed Underwriting System (GUS).

If your Loan Officer is not processing your loan request through GUS, find yourself a new Loan Officer. At Bridgeview Bank all loan pre-qualification letters are processed through GUS

To get started on your USDA Loan, you can submit an online loan application or call (866) 552-5912. If you meet Bridgeview Bank investor guidelines, you will be emailed a loan pre-qualification letter and an analysis of your monthly mortgage payment and estimated closing costs.

PROPERTY SPECIFIC

Eligible Properties
Existing attached & detached single family residences
New construction with permanent financing only
PUD's (i.e. Townhomes)
Condo-units. HUD, VA, FNMA or FHLMC approved project
Ineligible Properties
Co-ops
Mixed-use
Condotels
Manufactured homes
Log cabin homes
Single Family Homes where the land value exceeds 30% of the appraised value AND can be sub divided.
House not in move-in condition (i.e. no “fixer-uppers”)
No income producing properties
Agriculture structures
Outbuildings that sync up with home buyers skill set (i.e. large garage with car lift being sold to an auto mechanic)
Ability to rent portion of the house
Separate living areas with dedicated entrances
Kitchenettes
Duplex
If land value based on the appraisal report exceed 30% of the appraised value:
Land can't be subdivided
Appraiser must indicate lot size is normal for the area
If the property is on well and septic
75 feet between well head and septic tank (can be 50 feet if approved by County)
100 feet between well head and septic drain field
Well head must be at least 10 feet from adjoining property line and roadway

STRUCTURING THE TRANSACTION

Down payment Requirement
No down payment is required
If borrower has adequate liquid assets (i.e. 20% of the property purchase price) to obtain conventional financing the borrower may be ineligible for the USDA Rural Development Loan
Seller Contribution
No down payment is required

PROPERTY INSPECTIONS

Home inspection are recommended but not required by the loan program
Appraisal report – approximate cost $495
Pest inspection (if stipulated in the sales contract) – approximate cost $75 to $100
Water test (if the property is on well water) – approximate cost $150 to $300
Septic certification (required if the appraiser is unable to determine the distance between the well head and septic tank/drain field) – approximate cost $100