A few months back we received a call from a nice family from Fort Deposit, Alabama asking about building a new home after having outgrown their current home. We had given them several options and a plan for building on land they already owned with an FHA construction-to-permanent loan. Ultimately after researching and planning for several weeks they decided nine to ten months to have their new home built was just too long for their needs.
After a quick re-evaluation, we pre-approved them for a several other loan products including a USDA loan with the disclaimer that any property they found would first need to be eligible for USDA financing. A few days later they contacted an agent and found a great home on 14 acres with a similar floor plan that was built in the last ten years for under $260,000. The property was loaded with amenities like granite counter tops, hardwood floors, custom tile bathrooms, and an outdoor kitchen as well as energy saving options like spray foam insulation in the attic and tank-less hot water heater/circulation system. Not to mention to surrounding land was loaded with mature pines and provided the privacy they were hoping for (see more pictures below).
Within a few short days the home was under contract and we had USDA loan approval. The contract was written for 45 days and we had their loan ready and clear to close in 41 days. The sellers and agents were all very pleased and closing went very smoothly as planned. Most importantly the hard-working family who thought they would build found using a USDA loan and buying an existing home ended giving them an attractive home in a short amount of time, with little to no money out of pocket (seller’s concessions applied), and very affordable payments.
As it was with this family, the home buying process doesn’t always end up exactly where you start and that is why it is important you choose a lender that is an expert in closing loans custom fit for you in your market in Alabama or Florida. Many lenders pretend, we deliver.
There is never any fee or obligation to learn more about the buying process, research your different loan options, get a quote, or get pre-approved. You can visit us online for quotes and pre-approvals 24 hours a day or for more information give us a call at 888-269-8335 during normal business hours 8-5pm M-F.
Unlike any other loan, the property you want to buy (or refinance) needs to be USDA eligible. There is a huge misconception about what USDA defines as rural and most people are shocked to learn that millions of properties close to major cities are eligible. You can check a property’s eligibility yourself by clicking here (click “accept”, Single Family from the top menu, and input the address). If the property is eligible, you need to know if your income is below the limit for the state and county where you are buying (or refinancing) in. You can check to see if you are beneath the household income limit here.
If your income is within the limit and the property is eligible, you are ready to see if your credit and income qualifies. There is no way to lay out all the guidelines, but it is important for all to know that USDA sets the floor for credit scores at 580 and they like to see a 680 score or better. If your scores are acceptable USDA also prefers a few (say 3) established credit accounts as well as 12 months of prior rent or mortgage payment history. Many lenders will say we are incorrect but alternative tradelines such as utility, insurance, and cell phone account history can be used. Underwriting a USDA loan manually is something many lenders avoid but we welcome with open arms.
It is true that USDA has tighter debt to income requirements (43% back end debt ratio) compared to FHA (45% and more) and conventional loans (up to 45%), however this one disadvantage is in many cases offset because of better interest rates and monthly mortgage insurance premiums as previously mentioned.
We do not pretend as if two scenarios are ever the same but having this background can help shape your decision making. If you want a free, no obligation USDA rate quote without applying click here. If you would like to get pre-approved, you can visit us online 24 hours a day or give us a call at 888-269-8335 during normal business hours 8-5pm M-F.Disclaimer