Get Qualified For the USDA Guaranteed Loan Program
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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
BORROWER SPECIFIC
Borrower Type Allowed
- U.S. citizens
- Permanent resident aliens
- First time home buyers allowed
- Non-occupant co-borrowers NOT allowed
- 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
- Middle Credit Score – 640 for each applicant for GUS automated underwriting approval
- Middle Credit Score – 580 for each applicant for manual underwriting approval and a documentable rent history within the last 12 months.
- 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
- 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