Each day we receive many questions regarding the USDA mortgage here in Florida. Below we have outlined some of the most frequently asked USDA Rural Housing loan questions
Question: Is the USDA Rural Housing program only for first time home buyers? J.Levy – North Port, FL
Answer: No! the program can be used by any qualified home buyer – not reserved for only first time homeowners. However, applicants that currently own a home will have additional restrictions.
Question: Will I required to take some kind of first time home buyers class with the USDA loan program? F. Simmons – Winter Haven, FL
Answer: No class or education is required with the USDA loan!
Question: Can I include closing costs into my USDA loan? H Kincaid – Gainesville FL
Answer: Yes, you will have two options to do this. First, the most common way is to negotiate your contract to have the home seller pay your closing cost. USDA Rural Development will permit the seller to pay up to 6% of buyers closing costs and pre paid escrow items. Another option is to roll your closing into your loan given the appraised value is high enough to support it. To use this option, the home must appraise higher than the sales price. USDA will permit buyers to roll in or include closing costs up to the appraised value of the home, not the just the sales price. You can also do a combination of these two options. Please click here for more info on closing costs
Question: How much are the USDA loan closing costs and pre paid escrow items? J Collier – Tallahassee, FL
Answer: The exact amount of closing costs, etc will depend on many different variables like your loan amount, current tax assessment on the home, homeowners insurance policy amount, among many other items. Generally speaking 3-6% of the sales price depending on how high the sale price is.
Question: Does the USDA program have a loan amount limit, or a cap on how much I can borrow ? D. McCoy – Deland, FL
Answer: There is no loan amount limit with the USDA RD program, home buyers qualify based on their debt and income. Please read here for more information.
Question: I found the perfect USDA eligible home, but it needs some repairs. Can I borrow extra money in my loan to pay for new carpet and a new fence in the back yard? J Vasquez – Winter Haven FL
Answer: Short answer is no, only closing costs can be included in your loan – assuming the appraised value is higher than sales price.
Question: I was reading the USDA housing program allows for 102% financing – does this mean we can receive 2% extra for repairs or money back. N. Zimmerman – Naples FL
Answer: The USDA 2% guarantee fee is the one time funding fee that is required by USDA Rural Housing. All government loan programs require the funding fee, this fee is included or rolled into your loan amount. Please click here to read a similar question. In addition to this, the USDA loan also requires a monthly mortgage insurance premium like FHA loans but much $$ less each month. ( most know this as PMI)
Question: I found a home that I like, but it has some issues with the roof and electrical. Will this pass USDA home inspection requirements ? L. Jefferson – Cape Coral, FL
Answer: USDA ( like FHA and VA) follow many of the same HUD requirements when it comes to the property condition. Generally speaking – any safety, electrical, plumbing, structural, HVAC, Roof, or WDO termite issues will probably need to be corrected before closing. It really depends on the seriousness of the problem and whether it will be required to be corrected before closing. Keep in mind many bank owned homes are being sold “as is” they will not correct or repair anything in most cases. The house has to generally be in decent overall condition. Now this doesn’t mean the house as to be perfect, every house has some little issues that are to be expected. The idea is to insure home buyers are purchasing a home in generally sound condition and don’t get in over their head with bad problems right after closing. Homebuyers looking to purchase a home that needs extensive repairs ( and money to do so) should read about the FHA 203K loan.
Question: What houses are approved for USDA mortgage financing in my area? What type of properties are permitted? Jose V – Clermont, FL
Answer: USDA Rural housing is for ANY single family home, townhome, condo that is located in a USDA eligible location. The house can be a short sale home, bank foreclosure, REO, by owner sale….doesn’t matter. The important factor is the physical location of the home, it must be located in a Florida rural housing approved location. Existing mobile manufactured homes are not permitted under the USDA program. Click here to view the USDA map for FL Many locations just outside of Orlando, Jacksonville, Tampa are currently eligible. Do not assume your location is not USDA Rural housing eligible before checking or calling us, you may be surprised!
Question: I put a contract in a home and was wondering if I need to pay a deposit of some sort? J. Bryan – Ocala, FL
Answer: Yes, typically a deposit will be required from the seller to show your “good intentions” on following through with the purchase. This is often called a escrow binder deposit or good faith deposit ,etc. For homes in the $100,000 – $200,000 range – typically a $500- $1,000 deposit is customary in Florida. Some buyers may decide to give more to strengthen their offer and make it look better. Any deposit money paid in advance will be applied towards the purchase of the home. Buyers will often times get this deposit money back in the event of appraisal, financing or home inspection issues. It really depends on the contingencies written into the contract, but the items listed above are pretty standard. Insure you check with your realtor.
Question: I owned a home a few years ago, can I purchase a new home with USDA loans. I thought the USDA program was only for first time home buyers? D Clayton – High Springs, FL
Answer: Yes you can! Any qualified buyer can use the USDA program to purchase their next home. The program is not reserved only for first time homeowners.
Question: is there a limit on how much income my household can make each year with the Rural Development program ? Where do I find this information? L. Bolden – Brandon FL
Answer: Yes, each county has a different limit based on a verify of factors – number or members in the household, elderly and disabilities. Please click the underlined link to read more about USDA income limits in Florida. Please remember, the USDA income limits apply to ALL members in the household that generate income, Not only the parties on the loan application. If your income appears to be close to the limit, please contact us so we can formally review with you.
Question: My income is currently under the USDA Collier County limit right now, what happens if I get a raise at my job and my income goes over the limit in the future? J. Carney – Marco Island, FL
Answer: The only concern is your household income at the time of closing, not in the future.
Question: What kind of credit score do I need to pre qualify for a USDA loan? J Duval – Sarasota, FL
Answer: We currently require a minimum credit score of 640. However, this min credit score requirement does not guarantee USDA financing. USDA Rural housing has other requirements in place for borrowers that have any past bankruptcy, foreclosure, or short sales. Mortgage qualifying requirements have changed drastically over recent years, and still are. Contact today for the latest approval requirements.
Question: I understand the USDA loan is 100% financing. But I have some money saved up and I would like to contribute a down payment, can I do that? K. Stanford – Spring Hill FL
Answer: For sure! USDA will permit buyers to put 3%, 5%, etc down payment if they choose. However, the program is geared toward buyers that do not have the means ( down payment) for a conventional home loan. If you have 20% for a down payment for example, you will do a standard conventional mortgage.
Question: My realtor informed me that I cannot get a USDA loan if the house has a pool, is this correct? A. Myers – Lakeland FL
Answer: Pools are permitted with the USDA program. However, the value of the pool cannot be included in the appraisal, this can cause a problem in some cases with the value. Click here to read more about USDA loans and pools
Question: I found a property I would like to write a offer on today. But the house is located on a dirt road and my lender said USDA program requirements will not permit this. Can you clarify this for me before I submit my offer. J Spencer – Homosassa FL
Answer: USDA follows HUD handbook requirements on road guidelines. Basically the road must provide safe vehicle and public access from a public or private road. Additionally, all roads are required to have an all weather surface and maintained by a road maintenance agreement by all home owners on the street or home owners association. Some dirt roads (county maintained especially) are fine and generally approved. Please contact us for additional clarification.
Question: Can I use the 100% USDA loan to purchase an investment home? W. Quinn – Palm Coast FL
Answer: USDA can only be used to purchase a primary residence. Second home and investments properties financing are not permitted.
Question: I have determined that my area in Lee County is eligible for the USDA housing. What do I need to get together for the USDA loan application and approval process? G. Miller - LeeHigh Acres FL
Question: I have my USDA housing application complete and have already started looking at houses online. Do I need to use a certain realtor for this, or will any real estate agent work? L. Allen – Sarasota FL
Answer: Any realtor will be ok, just be sure they are working for you and you are happy with them. If you need assistance, let us know, we would be happy to make the connection for you. We have great partnering realtors throughout Florida that understand USDA loan well. Read more about Realtors by clicking here
Question: I was told that the USDA loan takes a real long time to close, is this true? K. Russell – St. Cloud FL
Answer: As of May 2014 – the entire process in Florida takes around 35 days from full contract to closing. These turn times can change, so contact us for updates. Unlike other loans, USDA loans go through a two part approval process with the lender and the actual USDA Rural Development office. Because of this, the process will take a week or so longer when compared to conventional or FHA home loans. Small price to pay since the program is 100% financing and has greatly reduced monthly mortgage insurance.
Question: How are the interest rates on USDA loans compared to other mortgage programs like FHA, etc? A. Franklin - Tavares, FL
Answer: USDA 30 year fix mortgage interest rates are pretty much in line with all the other government mortgage programs like FHA and VA. However, USDA loans have significantly lower monthly mortgage insurance (PMI) when compared to FHA loans. In fact the monthly mortgage insurance ( known as annual fee) is 3 times less when compared to FHA loans. The FHA loan is currently 1.35% (max 96.5% financing) and the USDA RD program is .40%. This is important to remember and is a big benefit of USDA loans. Even if you have savings and can do the FHA loan, you may want to opt for the USDA loan due to the reduced mortgage insurance costs. Interest rates do change on a weekly, and sometimes daily basis until the homebuyer is locked in. Home Buyers will typically lock in their interest rate once they have found the perfect home and have a set closing date.
Question: My realtor informed me that the USDA property eligibility map was changing October 1st 2014. Many locations that are currently eligible for the 100% USDA program may not be in the near future. Can you clarify?
Answer: This is a great question, and a very important one! As of 5/6/2014 – The current USDA eligible approved map (approved housing area) is NOT changing until Oct 1st 2014. After Oct 1st 2014 there could be a change especially in the surrounding communities outside of Orlando, Jacksonville, Tampa and others. To avoid any interruption in the event of a change, buyers want to insure they are under full contract no later than 9/15/2014. Remember, it takes the lender a few weeks on average to underwrite the loan file and send to USDA for final commitment. Once the file is received by USDA (before Oct 1st) the subject property address is protected of any map changes.. even if you close after Oct 1st. Please bookmark the blog and check back for any updates regarding the map changes. Also feel free to contact us with any questions. The current USDA approved map can be found here. Please note, this does not impact any homeowners that currently have a USDA loan and want to refinance.
Question: I currently have a USDA loan, what are my options to refinance my loan into a lower rate? Unfortunately I do not have any equity in my home. L. Sanders – Ocala FL
Do you have a question about the USDA loan application or lender pre approval process? Let us help by calling ph: 904-302-6060 or submitting the short request form on the right side of your screen. Please also be sure to visit our main site at www.UsdaMortgageSource.com for basic program details.