How to Find USDA Homes for Sale

A USDA Loan Might Be Just What Youre Looking For Find Out Here

USDA Loans are available for financing homes located in qualified rural areas. The definition of a rural area is fairly broad, so you might qualify even if you don’t think you’re in a rural area. The financing is guaranteed by the USDA – the United States Department of Agriculture. With the backing of the USDA, the loans have less risk to the lender so there is more flexibility with the qualification process. By using this rural housing loan package, families with modest incomes might qualify for home loans even without the need to put any money down.

Eligibility for USDA Loans

•You must have a dependable income.•You must be a US citizen or a qualified alien.•You must have a yearly income that is not more than the “moderate income” maximum set   for the area where the home is located.•You must have a qualifying credit history. This includes demonstrating that you are willing to   meet financial obligations when they are due. •You must be able to demonstrate that you are able to repay the loan, based on this formula:   PITI (Principle, Interest, Taxes, and Insurance) divided by gross monthly income must be 29%   or less. Your overall debt divided by your monthly income should be 41% or less.

Features of the USDA Loan Program

•Loans can be for up to 102% of the cost of the house. Certain restrictions apply.•Loans are 30 year fixed and the interest rate is the going market rate.•Loans can include closing costs if appraisal is higher than the selling price.•The seller may be allowed to help pay for the borrower’s closing costs.•The borrower must occupy the house. It cannot be rented out.

USDA Loans are a great way to become a homeowner when you might not otherwise qualify for a mortgage. Find out if you might be a candidate for this loan.

To find out more about USDA Loans, call Mortgage Options today: (803) 732-5787 or Toll Free at (866) 456-5511

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Do You Meet the Requirements for a USDA Mortgage Loan?

To qualify for a USDA home loan, you’ll need to make sure you meet the minimum requirements that include:

  • Be a U.S. citizen or legal permanent resident.
  • Have acceptable credit history. While there is no minimum credit score requirement set by the USDA, credit guidelines vary depending on your lender.
  • Your monthly payment, including principal, interest, insurance, and taxes, should not exceed 29% of your monthly income.
  • Your total debt payments, including your proposed mortgage payment, should not exceed 41% of your monthly income.
  • Have stable and dependable income, typically for a minimum of two years. Adjusted household income needs to be equal to or less than 115% of the area median income.

You can check on the USDA website if your income allows you to qualify for a USDA loan. You’ll be asked to enter the state and county where you will be purchasing a home, some details about the people that will live in your household, and your income information.

The website then determines if your income falls within the range allowed, taking into consideration the allowances the USDA provides for certain situations, such as having children or disabled family members living with you.

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Minimum USDA Property Requirements

The USDA wants to ensure that the home you choose meets certain property requirements to protect the borrower’s interest and well-being.

First and foremost, the home must serve as your primary residence. Fortunately, many property types are eligible for USDA loans apart from purchasing a pre-existing home, such as:

  • New construction
  • Manufactured or modular homes
  • Condos and townhouses
  • Short sales and foreclosed homes

USDA loans cannot be used for investment properties, meaning farms, rental or vacation homes, and other income-producing properties aren’t eligible. However, a property with acreage, barns, silos and so forth that are no longer in commercial use may still qualify.

More: Owning more than one property with a USDA loan.

How To Find USDA Homes for Sale

Now that you’re aware of the income and property requirements, here’s how you find USDA-eligible homes for sale. First, you’ll need to identify a qualifying area and then check if a specific house for sale there is eligible.

The best resource is to use the USDA property eligibility map to check the address of a specific house for sale. Once you type in the address and click search, you’ll then see a pop-up that will let you know if that address is or is not located in an eligible area.

If you do not have a specific address to check, you can zoom in on the same map to see shaded areas on the map that are eligible for USDA loans. You’ll notice that some areas have a peach-colored background and others are white. The peach tone indicates that homes in that region are not in USDA-eligible areas. Homes in the sections of the USDA loan map with a white background are generally USDA-eligible homes.

The USDA property eligibility map can be accessed
The USDA property eligibility map can be accessed on usda.gov.

One important thing to note is that you can’t assume every home in an area qualifies for USDA loans. Certain towns can be split up, with some parts eligible and some not. USDA uses the U.S. census to determine eligible areas for these loans. Because the program is used to help less populated areas build up, the more populated an area becomes, the less likely it will remain eligible.

Once you find an area you want to buy a home in, you can use traditional online real estate websites to find houses for sale. When you have specific addresses picked out, enter those in the map to see if they qualify. To make the process even easier, you should consider working with a real estate agent who is knowledgeable about buying USDA-eligible homes. They will be able to guide you through the process of finding homes in a specific area that qualify for a USDA loan. Working with an experienced professional can save you a lot of time in the long run.

What are USDA loan fees in 2022?

USDA mortgages come with two fees that are specific to the program: an upfront guarantee fee and an annual fee. The upfront guarantee fee this fiscal year is 1 percent of the loan amount. This fee can often be rolled into the mortgage instead of paying it out of pocket. The annual fee is 0.35 percent of the loan amount. So, a $100,000 mortgage would have a $1,000 one-time payment and a $350 per year ongoing payment for the life of the loan.

Both of these fees are charged to the lender who then, usually, passes the cost on to the borrower. These fees keep USDA loans subsidy-neutral, which means that any losses incurred by the program are paid for by these fees instead of taxpayer dollars. Depending on the needs of the program, the fees can change annually.

Other USDA mortgage costs might include:

  • Origination fees
  • Loan application fee
  • Title insurance
  • Processing or underwriting fees
  • Credit report and notary fees
  • Appraisal
  • Discount points (if you choose to purchase these)

What’s Next?

Once you’ve used the USDA loan map to determine if a property is eligible, your next step is to confirm you meet income requirements. The amount you can earn to have access to USDA loans is limited and varies by location and household size, so use this tool for more specific guidance.

After you’ve confirmed eligibility on both points, it’s time to apply for preapproval with a USDA-approved lender. You can then include the preapproval letter with your offer, which could help you stand out from other buyers.

How USDA loans work

Using a USDA loan, buyers can finance 100% of a home purchase price while getting access to better-than-average mortgage rates. This is because USDA mortgage rates are discounted as compared to other low-down payment loans.

Beyond that, USDA loans aren’t all that different from other home loan programs.

The repayment schedule doesn’t feature a “balloon” or anything non-standard; the closing costs are ordinary; and, prepayment penalties never apply.

The two areas where USDA loans are different is with respect to the loan type and down payment amount.

  • With a USDA loan, you don’t have to make a down payment. This is one of only two major loan programs that allow zero-down financing
  • The USDA loan program requires you to take a fixed-rate loan. Adjustable-rate mortgages are not available via the USDA rural loan program

Rural loans can be used by first-time home buyers and repeat home buyers alike. Homeowner counseling is not required to use the USDA program.

About the USDA Rural Housing Mortgage

The Rural Development loan’s full name is the USDA Single Family Housing Guaranteed Loan Program. However, the program is more commonly known as a USDA loan.

The Rural Development loan is sometimes called a “Section 502” loan, which refers to section 502(h) of the Housing Act of 1949, which makes the program possible.

This program is designed to help single-family home buyers and stimulate growth in less-populated, “rural,” and low-income areas.

That might sound restrictive. But in fact, 97% of the U.S. map is eligible for USDA loans, including many suburban areas near major cities. Any area with a population of 20,000 or less (or 35,000 or less in special cases) can be an eligible rural area.

Yet most U.S. home buyers, even those who have USDA loan eligibility, haven’t heard of this program or know little about it.

This is because the USDA loan program wasn’t launched until the 1990s. Only recently has it been updated and adjusted to appeal to rural and suburban buyers nationwide.

Many USDA-approved lenders don’t even list the USDA loan on their loan application menu. But many offer it.

So if you think you’re eligible for a zero-down USDA loan, it’s worth asking your shortlist of lenders whether they offer this program.

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