Each day we receive many questions regarding the USDA Rural Development mortgage. Below we have outlined some of the most frequently asked USDA rural housing loan questions for 2024.
Have a question about USDA loans? We are happy to help, we have loan specialists standing by 7 days a week to assist you. Just submit the short Info Request Form on this page for fast service or call us Ph: 800-743-7556
Please note, all the FAQs below pertain to the USDA 502 Guaranteed program only.
Question: Does USDA have a maximum loan amount or home sales price? J. Thomas – Daytona Beach, FL
ANSWER: No loan or sale price limit. Homebuyers will be qualified based on their debt-to-income ratios. Generally speaking, the maximum housing expense (mortgage payment with taxes and home insurance included) would be limited to 30% of the buyer(s) gross monthly income.
Question: I currently live in Tennessee, I want to get pre-approved for a USDA loan since I need to relocate for my job. My question is do I need to wait and get pre-approved in the state I’m looking to buy a home? Can I still live in TN and get pre-approved for a house I want to buy near Gainesville, FL? G. Smith – Jackson, TN
ANSWER: Great question. Yes, you can go ahead and get pre-approved now regardless of the state you are looking to move to. Just make sure your lender is approved to offer the USDA mortgage in the actual state you are moving to. Of course, you want to also ensure the location of the property is USDA eligible. Also, the lender will likely request a short letter from your employer stating the approximate transfer date and salary change if any.
Question: How do I get a USDA home loan application, does it cost anything to apply? H. Carter – Riverview- Hillsborough County FL
ANSWER: Not at all, homebuyers can contact us below to get started on their USDA mortgage application. There is no application fee to apply for the loan and the process is often finished in under 20min. Buyers can choose to complete their application over the phone, or via the web.
Question: How do I find a list of USDA homes for sale outside Orlando, Florida? L. Taylor – Apopka-Orange County FL
Answer: You can find all the USDA-approved rural-defined locations by clicking on the USDA eligibility map here. Please click on single-family housing under the property eligibility section at the top left. Once there you can input the address to see if the house is USDA-eligible. Keep in mind, the USDA 502 guarantee program can be used for any home purchase regardless of the home seller.
The property you purchase can be a bank foreclosure, short sale, HUD-owned home, standard “by owner” sale, etc. USDA Rural Housing is more concerned about where the house is located, as it must be located in an approved USDA rural defined location according to the map above.
The home also must be in overall good repair and in decent “move-in” type condition. Buyers cannot use the USDA loan to purchase properties that require extensive work or rehab. In addition, existing mobile and manufactured homes are not permitted by many lenders.
Question: Is the USDA Rural Housing program only for first-time home buyers? J.Levy – Charleston, SC
Answer: No, the program can be used by any qualified home buyer – not reserved for only first-time homeowners. However, applicants who currently own a home that they plan to retain will have additional restrictions. Please read more about all First Time Buyer Programs here.
Question: Will I be required to take some kind of first-time homebuyer class with the USDA loan program? F. Simmons – Jacksonville, FL
Answer: No class or education is required with the USDA Rural loan. New home buyers can contact us below and get pre-qualified in minutes.
Question: Can I include closing costs in my USDA mortgage, I was told by my realtor this is an option? H Kincaid – Flagler Beach, 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 the buyer’s USDA closing costs and prepaid 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 just the sales price. You can also do a combination of these two options. Learn more about USDA Closing Costs here
Question: How much are the USDA loan closing costs and pre-paid escrow items? Also, will the taxes and home insurance be included in my monthly mortgage payment? J. Collier – Tallahassee, FL
Answer: The exact amount of closing costs, etc will depend on many different variables like your loan amount, property state, current tax assessment, and homeowners insurance policy amount. Generally, 4-6% of the sales price is a good estimate depending on how high the sale price is.
As for the taxes and home insurance, this will be included or “escrowed” as part of your monthly mortgage payment, along with the USDA mortgage insurance as required by USDA. So your monthly mortgage payment will include principal, interest, taxes, home insurance and mortgage insurance (PMI) In addition, your taxes and home insurance will automatically be renewed for you each year.
Question: How much is the USDA appraisal cost, do I pay this fee? S.Leewood – Naples, FL
Answer: The USDA appraisal charge is typically $450.00 -$750.00. The exact amount can fluctuate depending on the market, property and lot size. The USDA appraisal fee is usually paid in advance (to the lender or appraisal management company) by the home buyer after the contract is executed and approved. Depending on how the sales contract /sellers concessions are structured, homebuyers can often receive this fee back, along with their deposit at closing.
Question: Does the USDA program have a loan amount limit or a cap on how much I can purchase? D. McCoy – Nashville, TN
Answer: There is NO purchase loan amount limit with the USDA 502 Guaranteed program, home buyers qualify based on their debt and income. Please learn more details about USDA & loan limits here. This will explain how maximum purchase qualifying amounts are determined.
Question: I found the perfect USDA-eligible home, but it needs some repairs. Can I borrow extra money on my loan to pay for new carpet and a new fence in the backyard? J Vasquez – Valdosta, GA
Answer: Depending on the lender and their in-house requirements, some may permit assuming the appraised value is higher than the purchase price.
Have a question? Please submit the Info Request Form on this page. More Frequently asked USDA RURAL Housing Loan questions are listed below.
USDA Mortgage FAQs Continued:
Question: I was reading the USDA housing program allows for 101% financing – does this mean we can receive 1.0% extra for repairs or money back. N. Zimmerman – Columbus, GA
Answer: The USDA 1.0% guarantee fee (as of 2024) is the one-time fee that is required by USDA Rural Housing. All government loan programs like USDA, VA and FHA mortgages require a one-time funding fee in order to sustain the programs and limit losses.
The fee is rolled into the final adjusted loan amount – Example: Let’s say Betty chooses 100% financing USDA purchase on a $200,000 home. Her base loan amount would be $200,000 – however, the final adjusted loan amount with the USDA guarantee fee included would be $202,000.
In addition to the Guarantee fee, the USDA loan also requires a monthly mortgage insurance premium like FHA loans but much $$ less each month. (most know this as PMI) Please read about the 2024 USDA Guarantee Fee here. The current USDA Fee schedule will remain in effect throughout the year.
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? Ocala, FL
Answer: USDA (like FHA and VA home loans) follows 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 likely need to be corrected before closing. It really depends on the severity of the problem and whether it will be required to be corrected before closing. The appraiser’s notes along with the lender’s underwriter will typically determine this.
Keep in mind many bank-owned or distressed homes are being sold “as is” and they will not correct or repair anything in most cases. The house has to generally be in decent overall condition. This doesn’t mean the house has to be perfect, as most homes have some little issues that are to be expected.
The idea is to ensure home buyers are purchasing a home in generally sound condition and don’t get in over their heads with serious problems and expenses right after closing. Safety-related issues are generally the most important, items like exposed wires, etc. Home buyers 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 – Sarasota, FL
Answer: USDA Rural housing is for ANY single-family home, townhome, PUD, or condo that is located within a USDA-eligible location. The house can be a short sale home, bank foreclosure, REO, or for sale by owner….doesn’t matter. The important factor is the physical location of the home, it must be located in a rural housing approved location.
Most lenders will also not permit building a new home on your own land or lot. However, purchasing a new home (new construction) from a builder is permitted. Click here to view the USDA map – this will show you all the approved locations based on the property address. For example, in Florida, many semi-rural locations just outside of Orlando, Jacksonville, Tampa, Gainesville and Tallahassee are still eligible!
Do not assume your location is not USDA Rural housing eligible before checking or calling us, you may be surprised. If your location is not USDA-approved, be sure to ask us about other financing alternatives that require little down payment. The FHA Mortgage is a great alternative for home buyers looking to purchase in more populated locations.
Question: I put a contract in a home and was wondering if I need to pay a deposit of some sort? J. Bryan – Macon, GA
Answer: Typically a deposit will be required from the seller to show your “good faith” in following through with the purchase. This is often called an escrow binder deposit or good faith deposit, etc. For homes in the $150,000 – $350,000 range, a $1,000- $2,500 deposit is typically customary. Some buyers may decide to provide a higher deposit to strengthen their offer, which is more important in a strong seller’s market.
Any deposit money paid in advance will be applied towards the purchase of the home. Buyers will oftentimes get their 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. Ensure you check with your realtor.
Question: I’m under contract to purchase a home now and about to get started on the loan processing. What type of paperwork or documentation do I need to get my USDA loan processed? Y. Summers – Lakeland, FL
Answer: You should make copies of your last (2) years’ tax returns, W2s, Last 2 months of bank statements, and last 3 months pay stubs. Also a copy of your driver’s license / ID and social security card. There may be additional paperwork needed, but these are the basic things needed for borrowers to start the USDA loan process.
Question: I owned a home years ago, and now want to consider purchasing a nice brick home I recently found. Can I purchase this home with a USDA loan? I thought the USDA program was only for first-time home buyers? I know the home is located in the approved USDA area outside of Tampa. D Clayton – Pasco County, 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. The home must be a primary residence, no second vacation homes or investment rental homes are allowed.
Question: Is there any USDA loan restriction on how long I must live in my home, or when I can sell my home? B. Gadsden – Atlanta, GA
Answer: No, you can move and sell your home anytime with USDA 502 Guaranteed Loan. The USDA mortgage does NOT have any prepayment or early payoff penalty. You can sell or pay off your loan whenever you like without restriction or fees. This is also the case with other Government-backed loans like FHA and VA. Sometimes restrictions can apply for buyers using down payment assistance (grants, bond money) in conjunction with their USDA loan. Please check with the agency in advance.
Question: Is there a limit on how much income your household can make each year with the Rural Development program? Where do I find this information? L. Bolden – Raleigh, North Carolina
Answer: Yes, each county has a different limit based on a variety of factors – number of people in the household, elderly and disabilities. Please check the USDA Eligibility Assessment link here.
Please remember, the USDA income limits apply to ALL members of the household that generate income, not only the parties on the loan application. The only exception to this is working Full-time students. If they work, their max income included is $480.00 per year, regardless of how much they make.
However, if they are dependent, this income can be offset and canceled because households always take a $480 deduction for dependents. If your income appears to be close to the limit, or you just aren’t sure how to calculate it, please contact us so we can formally review it with you. We are always happy to help.
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 – Naples, FL
Answer: This is a very common question we get. The only concern is your household income up to 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 – Greensboro, NC
Answer: Most lenders and banks require a minimum credit score of 620. However, this minimum credit score requirement does not guarantee USDA financing. USDA Rural Housing has other restrictions (set waiting periods) for applicants who have any past bankruptcy, foreclosure, short sales, or other serious financial hardships. Mortgage qualifying requirements have changed dramatically over recent years. Contact us today for the latest USDA 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 – Franklin, TN
Answer: For sure! USDA will permit buyers to put a 3%, 5%, etc down payment if they choose. However, the 502 Guaranteed program is geared toward buyers who do not have the means (down payment) for a conventional home loan. Example: If you have 20% for a down payment 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. In the past, the value of the pool could not be included in the home appraisal. However, years ago this rule changed to INCLUDE the contributory value of any in-ground swimming pool into the property value. Basically, USDA now views in-ground pools the same now as other mortgage programs.
Question: I found a property I would like to write an 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 – St. Augustine, 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 be maintained by a road maintenance agreement by all homeowners on the street or homeowners 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 rental home? W. Quinn – Orange Park, FL
Answer: USDA can only be used to purchase a primary residence. Second homes and investment properties are not permitted. Debt Service Coverage Ratio loans are popular with Real Estate Investors, learn more about DSCR Loans here.
Question: I have determined that my area is eligible for USDA housing. What do I need to get together for the USDA loan application and approval process? G. Miller – Jackson, Miss
Answer: Please click the highlighted link to the right to learn tips about being prepared for your USDA loan application.
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 – Birmingham, Ala
Answer: Any Realtor will be ok, just be sure they are working for you and you are happy with them. If you need assistance finding a great Realtor in your town, please let us know, we would be happy to make the connection for you. We have great partnering Realtors throughout the U.S. who understand the USDA loan process well. Contact us if you need assistance.
USDA Loan FAQs Continued:
Question: I was told that the USDA loan takes a really long time to close, is this true? K. Russell – Kissimmee – St. Cloud FL
Answer: The entire USDA closing process can take 30-45 days from full contract acceptance to closing, depending on your state. The USDA Rural Housing closing turn times do change. Unlike other mortgages, USDA loans go through a two-step approval process with the lender/bank and the actual USDA Rural Development office. Because of this, the process can take up to a week extra when compared to conventional or FHA mortgages.
The good news is USDA has implemented some recent changes and turn times have improved as a result. Read more about USDA closing turn times here. Please note, if you are a home buyer and have questions about an existing USDA file you have in process with another mortgage company (lender, broker or bank) you will need to contact them directly to obtain your current loan status.
Question: When is my first mortgage payment due after I close on my USDA loan? G. Franklin – Knoxville, TN
Answer: You normally skip the following month after closing. Example: let’s say you close on your USDA RD loan on August 9th, your first mortgage payment won’t be due until Oct 1st. The same applies to a USDA refinance, you can skip up to two months of mortgage payments.
Question: How are the mortgage interest rates on USDA loans compared to other loan programs like FHA, VA, etc? A. Franklin – Little Rock, Ark
Answer: USDA interest rates are pretty much the same as other government mortgage programs like FHA and VA home loans. However, USDA loans have significantly lower monthly mortgage insurance (PMI) when compared to FHA loans. In fact, the monthly mortgage insurance (known as an annual fee) is much less when compared to FHA loans.
The FHA monthly mortgage insurance is currently .55% for the max 96.5% financing as of 2024, and the USDA RD program is .35% This is important to remember and is a slight benefit of the USDA program. Even if you have enough savings and can afford the min 3.5% down payment required by FHA loans, you may want to consider the USDA loan just for the reduced mortgage insurance costs.
USDA interest rates do change on a daily basis until the home buyer’s rate is locked in. Buyers will typically “lock-in” their mortgage interest rate once they have signed a contract to purchase a home and have a closing settlement date established.
Question: I heard the USDA property eligibility map was changing, but got delayed? Many locations that are currently eligible for the 100% USDA program may not be in the near future. Can you clarify? M. Broward – Jackson, Tennessee
Answer: USDA Rural Housing has implemented a newly updated map (eligible area) a few years ago. Homebuyers can find the new 2024 USDA map here to check a property address for eligibility. If you are NOT located near any USDA-eligible housing locations, please submit the short Info Request Form on the right side of this page to discuss alternate min down payment financing options.
Please bookmark our blog for important updates. Please also note, this map area change does not impact homeowners that currently have a USDA loan and want to refinance into a lower interest rate.
Question: Do you have a USDA mortgage payment calculator I can figure up my monthly mortgage payment? E. Sanders – Fayetteville, AR
Answer: For sure, just look down at the lower right side of your screen. There you will find a USDA monthly payment calculator that will include principal, interest, monthly taxes, home insurance, and monthly mortgage insurance. Tip – be sure to add 1.0% to your loan amount to factor in the 1% USDA guarantee fee that will be added to your loan. For example: if you are purchasing a $150,000 home at 100% financing with no down payment, be sure to input $151,500 for your loan amount.
Question: I have a USDA mortgage on my house now. If I sell my house next year, can I keep the profit/equity? D. Filmore – Greenville, South Carolina
Answer: Yes, assuming you have a standard USDA 502 Guaranteed loan (no special subsidy) You can sell your house and pocket the profits just like any other home sale. You can also use the USDA home loan again (on your next home) if you still meet the eligibility and qualifying requirements.
Question: My husband and I are planning to purchase a home for around $780,000 outside of Orlando in a USDA approved area. Can we look at this program? or is there a loan amount limit?
Answer: Technically there is no loan amount limit with USDA loans. However, there are household income limits and debt to income ratio caps. Because of these caps, most home purchase prices will likely be limited to $500,000 or below and this is assuming a “best case” for a large family of 5+ members (higher permitted income limit) that has little to zero other debt. In your case, you will likely be required to obtain a Jumbo mortgage as your income likely exceeds the limit (contact us to review in detail)
Jumbo programs today offer low-down-payment options of up to 95% financing for approved buyers. Buyers can see the complete Jumbo home buyers guide here.
Question: I currently have a USDA loan, what are my options to refinance my loan into a lower interest rate? I would like to try to lower my monthly payment. Unfortunately, I do not have any equity in my home. L. Sanders – Pensacola, FL
Answer: Please click the highlighted link → to learn about the USDA Streamline Assist Refinance program available here in select states.
Please view additional frequently asked USDA rural housing loan questions in the comments below.
Questions? Just submit the short Info Request Form on this page for fast service. You can also contact us Monday – Sunday at Ph: 800-743-7556. Proud to serve home buyers across the U.S.
Purchasing a home, but not located in a Rural Development approved area? Click to learn about the FHA Mortgage.
Frequently asked USDA Rural Housing Loan questions
Cynthia says
I’m applying for a USDA loan, but I have a question. I wanted to know is it against the rules for a boyfriend to give money to his girlfriend toward closing cost as a gift ?
USDA Mortgage Source says
Great question. Gift money is allowed for USDA loans to help with closing costs. You just want to insure the gift money is documentable and NOT paid in the form of cash. Be sure to make a copy of the check you receive from the gift donor and also make a copy of the deposit slip when you deposit the gift money into your bank account. A standard gift letter will also be required to be signed by both parties, this is something your lender will provide.
Devin says
Is true the USDA program end this year in December?No more USDA loan for 2015?
USDA Mortgage Source says
The USDA purchase program will continue as normal, no change in 2015. The USDA Pilot Refinance program is scheduled to end Dec 2014 unless extended.
Hannah says
Do I have to add in home owners insurence and taxes to my usda loan or can I pre pay it at the beginning of the year and show them the paper work for it?
USDA Mortgage Source says
Your home owners insurance and tax reserves will be escrowed (held back) on your USDA loan when you close. Included in your total closing costs will be 1 year of insurance and so many months of tax reserves. It will also be renewed for you each year after.
Penny says
Does my boyfriend have to be on my mortgage if he is going to live with me? I know his income counted towards them pre qualifying me but i really wany it to be only in my name.
USDA Mortgage Source says
Penny, thank you for your question. No, your boyfriend is NOT required to be on the application or mortgage with you. Additionally, his income will NOT be used for qualifying. It will just be your income and debt only. However, his income will be looked at just to insure the household does not exceed the set income limit for your county.
Jackie Levy says
Will I be required to pay the USDA monthly mortgage insurance through the entire life of the loan? Or can I drop and cancel the USDA mortgage insurance once I pay down my mortgage to 80% ?
USDA Mortgage Source says
Thank you for the great question. USDA monthly mortgage insurance is paid through the life of the loan – 30 years, just like a FHA mortgage. However, homeowners that do accumulate enough equity (under 80% loan to value) can refinance into a conventional loan and drop the monthly PMI assuming they qualify for a conventional refinance at that time.
USDA Mortgage Source says
Great question. Yes, you can count them (along with yourself) towards the household number assuming you have primary custody of dependents.
Robinson says
I can’t be on the loan with my husband but have lots of steady income. Can my income be used to determined how much loan we can afford? We also have land with a balance can that be added into the loan amount as well?
USDA Mortgage Source says
Thanks for your question. The answer is NO, your income cannot be used for qualifying unless you are listed on the loan application with your husband. However, your income WILL be including in insure the household does not exceed the USDA income limit for your county.
Mike says
If someone took out a USDA loan to buy their home 3 years ago (and never refinanced) can they move out and rent the home with the USDA mortgage on it? They are buying a new home under a different loan program.
USDA Mortgage Source says
Hi Mike,
Yes, they can as long as they are using a different mortgage program to purchase the next house. In addition, they would need to be able to qualify with the existing mortgage plus new mortgage. Also, there is a chance you may not be able to use the new rent payments to offset the current mortgage payment until that home has been rented for a certain about of time. Conventional loans recently changed their guidelines and require no wait – other loans may be require the home be rented for 2 years.
Lesli Wallace says
Who sets up inspection for the house. The bank or buyer?
USDA Mortgage Source says
The appraisal inspection is always set up by the lender or bank. The home inspection is voluntary most the time and ordered/set up by the home buyer and their realtor. Home inspections aren’t always required, but always recommended since they provide “piece of mind” that you know what you are getting.
Alely Ranada says
I had my home for about 4 years now, and theres is 4 of us in our usda home loan. How do i remove an applicant out of the usda home loan and what are the process of doing so? Do we need to recalculate the loans all over again with out the applicant that will be taken out?
USDA Mortgage Source says
You would need to refinance to remove a borrower from the loan. Please submit the short info request on the right side of your screen and a loan specialist will contact you to discuss all the details.
Victoria says
Can you get a USDA loan on a home with a in-ground swimming pool in Indiana?
USDA Mortgage Source says
Yes, as long as the home is located in one of the approved areas.
Erica Kerr says
Does your company do USDA no money down loans for first time buyers in Spring hill, FL?
USDA Mortgage Source says
For sure, please submit the info request form on the right side of your page and a loan specialist will contact you.
Jay Taylor says
This may have been answered previously: Over the course of 30 years one can expect a change of income, additional residents i.e. new spouse, elderly parent, etc. Do these changes need to be reported? Assuming these changes have occurred after the house has been closed and loan put into place.
USDA Mortgage Source says
Thank you for your question. USDA is only concerned with the household income (for eligibility) up until the closing date, not after closing.
Kathie says
My boyfriend has a home with a USDA mortgage. We would like to live together. How will this affect his mortgage payments?
In the event that it does increase his payments due to my income, if I move out or my income changes due to retirement, do the payments decrease accordingly.
USDA Mortgage Source says
You moving in or out of the home will not impact his mortgage payments, or the terms of his loan in any way. Thank you.
tina says
If I have a usda house already and I decide to move to another state before the loan is payed off is there a way to switch or trade a usda house to another? Like the state I already have one can usda take that one back and give it to another usda barrow who wants it and Carrie my loan to a different one in the state I move to?
USDA Mortgage Source says
Great question. No, this is not possible. Each mortgage is attached to a specific property address. You will likely need to sell your current home first (pay off loan immediately after) then close on the next house. You can use the USDA loan again on your next home, assuming you still meet the qualifying and eligibility factors.
The person that purchases your home will need to qualify for their own loan.
Josh says
Is the USDA income limit based off my most recent W-2s total annual income or based off my most recent pay stubs? My previous w2s show my annual income well under the income limit but I am currently making more money so if you base it off my recent pay stubs and do the math I would be over the oncome limit…
USDA Mortgage Source says
Your yearly income (for USDA eligibility purposes) will be based off your recent pay history. Your year to date income will be averaged out to formulate a monthly amount. Thanks for your question.
Ginger says
Does the 2.75% depend on the appraisal value? For instance, we are currently doing a USDA loan on a house. Sales price is $118,500 with seller contributing $3,500 to closing. Appraised at $125,000. We need about $3,500 for closing and since it appraised at $125,000 we should be able to tie it into our loan. However with the 2.75% fee is that for the loan as a whole including the closing costs or is that just based on the sales price?
If it is based on both sales and closing costs if the fee goes over the appraised value of $125,000 does that mean we are only approved for the $125,000 and would have to come out of pocket for the remainder of the 2.75% fee?
USDA Mortgage Source says
The 2.75% Guaranteed fee is rolled into your loan – you are not required to pay this out of pocket. Any yes, this fee is always 2.75% regardless of the sales price or appraised value of the home.
steffanie says
Is the appraisal cost included in the loan or will i be paying out of pocket? Also, if the seller pays closing costs will i have to pay anything to close on a house?
USDA Mortgage Source says
The appraisal is typically paid in advanced and can be paid by home seller along with all the other closing costs. USDA will permit this. However, it must be negotiated into the purchase contract. Please consult with your realtor about this. thank you.
Hannah says
I’ve lived in my USA home for 5 years and we are going to move out of state this year. What happens when we sell? We purchased the home at 155k and have done a lot of renovations and upgrades to the home. Could we sell the house at a higher price? What would happen to the extra? We want to purchase a new home in the state we move to, so want to have as much as possible for a down payment and moving costs. Thank you in advance.
USDA Mortgage Source says
It’s no different than any other kind of real estate sale. Sure you can sell the house at a higher price, the market will determine what your house is currently worth today. Any equity you have is yours to keep. Consult with a realtor to help determine the market price.
Natali Blough says
I have a usda loan, I want to make extra payments. Is this loan a non flexible or flexible loan?
USDA Mortgage Source says
Sure, you can make extra payments anytime. You can also pay off the mortgage anytime without penalty.
Arden says
Purchased home 3 years ago with a usda rural development guarantee, I am moving to a different state for work and have a family which wants me to sell home on a 2 year land contract. Is this permisable?
USDA Mortgage Source says
You can sell your current home with whatever terms you choose. However, if you retain the mortgage on that house, it may pose an issue qualifying for the mortgage on your next house (assuming you plan to purchase another home)
Lydia Smith says
If the home is appraised above the asking price can you use the extra money to purchase appliances for the home?
USDA Mortgage Source says
No, but you can use the money to pay your closing costs. This includes closing costs you may have paid in advance like appraisal, home inspection or survey costs.
Lesley says
I live in the state of Florida. Can I take advantage of the Florida Bond (specifically Clay County) of $7500 to use towards a down payment & closing cost in addition to the USDA loan program?
USDA Mortgage Source says
Yes, you can use it towards closing costs or to reduce your loan amount.
Casey Hawkins says
I have already been approved for a USDA loan. I am waiting for the appraisal that is suppose to be back this Wednesday. How long after that do I have to wait to close? I started this process the beginning of March this year, I just want to know if I’m finaaly reaching the finish line.
USDA Mortgage Source says
Please refer to your lender for closing times, etc. This can vary from lender to lender and state.
Shenae says
I live in Indiana. I am looking to sell my house soon and buy something else. I currently have a USDA loan. I’m wondering if there are any stipulations on how much I sell my home for?
USDA Mortgage Source says
you can sell your home for any amount you choose. Also, you can apply for a new USDA loan once if you sell your home before purchasing another home (assuming you require financing on the next house)
Kelly says
My husband used a RHS loan in June 2015 to purchase our home. We are having to relocate in July 2016 for a few years to another part of the state and would like to rent out our home until we return. Are we able to do so under the RHS loan?
USDA Mortgage Source says
Assuming you did a normal USDA 502 Guarantee loan, there is no restriction on renting out your home. The only problem it could cause if you wanted to finance a new home, that may be an issue.
Mary says
I’m getting my home inspection done for my USDA loan. Is it required to also get a pest inspection done?
USDA Mortgage Source says
Pest inspection / WDO will not be required unless the appraiser denotes possible visible pest related issues in the appraisal report. If that is the case, the lenders underwriter may call for a detailed pest inspection/wdo report to be completed before moving forward in the loan process. Any possible issues detailed will likely need to be corrected before closing can take place.
Either way, pest inspection/WDO report are pretty cheap and always recommended to ensure you make a sound investment.
Samantha Gates says
Can you buy a house in a different state through the usda home loan or do you have to stay in the same state?
USDA Mortgage Source says
The home you purchase can be in any state eligible location. But the house must be your primary home, owner occupied.
Susan says
Question….can bond funds or down pmt assistance be used in conjunction with USDA loan?
USDA Mortgage Source says
Even though the USDA loan is 100% financing, you can still use most government backed bond programs (state, county or city) to reduce your overall loan amount, pay closing costs, etc.
Debi Cooper says
I have a couple of debts in collections that I have been battling to have removed since they are inaccurate. Thus far, they have not been removed and will most likely continue to show in my credit report unless I pay them. I am considering paying them rather than challenging their validity any longer just so I can move forward with my home loan application. My question is this: How long after the debts in collection have been paid off do I have to wait to apply for the USRD home loan? I live in Alaska, so I don’t know if there’s any special rules for our state or not. I have a credit score higher than the required 620, so I was hoping the collections issue wouldn’t be a problem. Thanks
USDA Mortgage Source says
It’s possible to actual hurt your credit scores more initially by paying off the collections. This can happen during the first few months. It depends on several variables like the depth of your credit, collection age, amount, type, etc. I recommend you speak to a loan specialist and do a full application before you pay off any collections. If the collection accounts are old, small balances you may not be required to do anything.
Renee says
Hello,
I am looking to buy a home from my boyfriends father. It is the only affordable home in our very small town. He purchased the home for 70k and is willing to sell it to me for 75. Would this be an eligible USDA purchase or will they consider our relationship a relationship of interest? I am in no way related to the seller and he has no financial interest in the property other than to receive a little more that what he paid for it.
USDA Mortgage Source says
This would be fine, you just need to make sure the property address is USDA eligible. http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
Jaclyn says
With a USDA loan, is there an amount paid back when selling the home? Like, when we later sell or home, do we keep all the equity earned, or is a percent due back to the program.
USDA Mortgage Source says
You keep any equity earned just like any other home loan. The only exception to this is if you do a special county/state bond program, or subsidy in conjunction with your USDA loan. That part could have a re-payment clause if you sell the home within a certain amount of time.
Leah says
We are under contract with a home with a usda loan. The house is kind of small but we can live in it for awhile, my question is, can we eventually refinance and take out a loan to build an addition to the house or does USDA prohibit this?
USDA Mortgage Source says
USDA does allow cash out refinance, only for interest rate reductions. Read more about all the USDA refinance FAQ’s here – https://usdamortgagesource.com/blog/2014/usda-loan-rural-refinance-homeowner-qa/
Sabrina Lowe says
When does your credit report expire? Is started the process in Sept. and couldn’t find a house. I just found one and my credit was pulled again. When will this one expire. I don’t want so many hits on my credit
USDA Mortgage Source says
It can depend on the lender, but generally credit reports are valid for 90 days.
Mo says
With a typical mortgage in order to include each person’s income for how much they can get a loan approved for, their credit needs to be utilized. Is that also true with a USDA loan?
USDA Mortgage Source says
Yes, USDA is very much the same as other mortgage programs. The key difference is the household income limits and eligible property locations.
Mo says
So they wont include the person’s income who’s credit is not eligible? For example a husband and wife would like to purchase their first home under the USDA guaranteed loan program. They fall under the eligibility requirements for their household income and property location. Including both of their incomes (and taking into consideration the debt to income ratio) they can borrow up to $220,000. However when it comes to credit the husbands credit meets the credit requirements for the USDA loan but the wife’s credit does not. Because the wife’s credit does not meet the standards would they not consider her income when calculating how much they can borrow?
USDA Mortgage Source says
You are correct. Since the wife’s credit score is below the minimum standards needed to qualify, she would not be listed on the loan application. Therefore her income would not be used for qualifying. The wife would only be listed on title – depending on the property state.
Felicia Hastings says
Will be my first time buying a home. My boyfriend and I are wanting to buy a house! I have a child. Never been married so by law im a single mother. Would it help with the chances of qualifying if we combined our incomes?or would it be best to apply alone? Will my payments be lower if I apply alone? How do I know if I will qualify. If I dont. Will I be able to reapply ans make him the other applicant? We both meet the income limit in our county. I was just wondering what would be the best option?
USDA Mortgage Source says
Whether you should apply by yourself, or with your boyfriend will depend on many things like credit, debt, etc. Your payments only change with the loan amount, not based on how many people are on the application. Contact us and a loan specialist will determine the best course of action for you.
Stephanie says
How long do I need to live in my home before I can sell? I have a rural development loan in New Hampshire. If I sell will there be penalties?
USDA Mortgage Source says
You can sell and move anytime with the USDA 502 Guaranteed program, no penalty.
Clifford says
I am qualified up to 300k for a usda loan and found a house in Virginia, I want to put an offer on. My offer would be full asking price (230k) with seller paying closing costs. If the seller accepts and the appraisal comes in less say 220k or more 240k, would the usda loan be denied for coming back higher or lower than the sale price?
USDA Mortgage Source says
If the appraisal comes back lower than the sales price – the home seller must reduce the price, or the home buyer must pay the difference. The loan can only be up to the appraised value.
If the appraisal comes back higher that is fine.
Tony Cash says
I currently own a home in one state with a USDA loan. I am moving to another state (more than 250 miles) and I want to buy another house with USDA loan. I will try to sell my current home, but if it does not sell before I need to move will I be able to close on the second house? I am relocating due to work. Is there an exemption to the rule that you may only have one USDA loan at a time?
USDA Mortgage Source says
Yes, however, you would need to qualify with your current mortgage payment (plus any regular debt) and the new mortgage payment.
This is often difficult due to the debt to income ratio caps and income limits with USDA loans. It all depends on current debt, total household income, the size of household, etc.
Emma says
Is it allowed for a family member to give me the money for closing costs? It is not money that has to be repaid.
USDA Mortgage Source says
Yes, family can gift money for USDA closing costs and/or a down payment if you choose. Does not need to be repaid.
Tom says
I recently purchased a home with a USDA RD loan in the state of South Dakota in Oct. of 2015. I was told that I was unable to purchase a home that had a pool, but according to this forum and others it appears that this is permitted. I was also told that I had to reside in the home for 3 years, but the general consensus is that I am able to sell without any stipulations on years of residence. I am looking to sell this home and relocate to another state. Is there any rules regarding how many times I am able to use the USDA RD loan program to purchase a home as long as I continually fall under the guidelines?
USDA Mortgage Source says
You can sell and move anytime without penalty. You can use the USDA 502 Guaranteed loan program as many times as you like assuming you still meet qualifying and eligibility requirements.
Angela says
My daughter is using the rural development loan to purchase a home, they are asking her to pay 6% down on it. She doesn’t quite have enough money and said that she cannot take any money as a gift to pay towards. Her loan officer told her this, is this true? She said she had to prove how she received the money and that it was not a gift.
USDA Mortgage Source says
Gift funds are permitted from allowable sources (family, etc) to pay for a downpayment and/or closing costs.The gift will need to be documented (copy of check, deposit slip, etc)
The lender will also require a standard gift letter with some basic information. They should be able to provide this to you.
Jessica says
I am trying to qualify for a USDA loan in Florida, the income limit is $78,200. Will they include our assets in the income limit? For example, my fiance and I have $20,000 in our savings combined. Should we withdraw some of that money? are we still within the household income limit? (it’s just us that will live in the house)
USDA Mortgage Source says
The USDA income limits only pertain to your current income average. Savings and/or assets are included.
Dawn says
can the quarterly property taxes included into the loan payments with a USDA loan?
USDA Mortgage Source says
Yes, taxes and home insurance are required to be escrowed in your monthly mortgage payment.
Precious says
I currently have an USDA loan. I have lived in my home for 8 years. Since then, I have added to my family and want a bigger place. If I sell my USDA home can I apply for another USDA loan to purchase my new home?
USDA Mortgage Source says
For sure! You can use the USDA program more than once. Assuming you still qualify in regards to credit, household income eligibility, etc.
Jake says
Can the loan be used solely to purchase a plot of land, on which a house will be built using personal funds?
USDA Mortgage Source says
No, cannot be used to purchase vacant land/lot or acreage.
thank you
Cassandra Davis says
I have a USDA loan right now but am living to fair from my job and want to sell the house and move closer is there a prepayment penalty? Some people are telling me that there is not any penalties that I can sell and move just want to be sure. Really not liking the area that we are currently living in either. please help.
USDA Mortgage Source says
No penalty for paying off early assuming you have a standard USDA 502 Guaranteed loan.
Willma says
Hi, thanks for this blog post, it’s been very helpful. I was wondering, is there a limit to how long you are approved for the loan? For example, after I get approved for the loan, do I have to find a house within a certain time frame, or is it okay to wait? I will be approved for this loan sometime next week, but I don’t actually want to move until July. Will I have to re-apply again if I wait too long?
USDA Mortgage Source says
It’s ok to wait. Most pre-approval letters will be valid for 3-4 months. After this time, you will need to update any changes (if applicable) to your application with the mortgage company. Things like income changes, job change, new debts, etc. The lender will likely update your credit report at this time as well. Be sure to discuss all the “do’s and dont’s” with your lender after you are pre-approved.
Anne-Marie says
My daughter, her husband, and her two children, ages 4 and 1, are living with us while my son-in-law finishes college-two more years. Do they have to be on the application for the home loan, or will my husband and I be the only applicants? How do we provide evidence they reside in our home?
USDA Mortgage Source says
No, they will not be listed on the application with you and husband. However, any income they generate WILL be included in the overall household income calculation for eligibility purposes only – not loan qualifying purposes. Remember there is a limit on how much income the household can make depending on property location, family size, dependants, etc. Working full-time College student income is excluded.
Sarah says
If I get into this USDA loan and my household income increases dramatically in the next 5 years, what will happen to my monthly payment? Will I still qualify under the loan?
USDA Mortgage Source says
USDA is only concerned with your Household income, in regards to eligibility, at the time of closing. Any increases in the future do not change anything.
Nancy says
Can I purchase a foreclosed home for less than my approval amount? And if so would the higher appraisal value affect my monthly payment?
USDA Mortgage Source says
You can purchase any home less than your approval amount, assuming the home address is eligible. The higher appraisal has no impact on monthly payment.
thank you
Brittany says
We found a house we really want to consider buying, but it is missing carpeting in several rooms. Is there a way around this? Is it something that the seller could negotiate into the price? I understand that this is a disqualification for a USDA loan, but if the seller agreed to install new carpet, would that work? Or does it not matter because it would need to be appraised prior to that?
USDA Mortgage Source says
Yes, the seller can install new carpet. The appraiser would likely need to revisit the property for a second time after the carpet is installed. Or you can wait and make sure lender does not order appraisal until new carpet is installed. That way they only need to visit the property one time, thus saving you money.
Miranda Baker says
Does an increase in pay on the USDA 502 loan affect your payment? Can you lose your home or financing if your income increases above the limits? (I am in Indiana for reference)
USDA Mortgage Source says
USDA’s only concern is your household income at the time of closing on your home. What happens after closing is irrelevant. It’s pretty common for borrowers income to increase through their lifetime.
Tim Thompson says
I am thinking of applying for USDA loan but I was wondering, if I put 20% down do I have to take the PMI?
USDA Mortgage Source says
If you have the means to do a conventional loan (10-20% down) this will be the better option. PMI is required on USDA loans even with a down payment. Additionally, you have a one-time USDA funding fee added to the loan. All of this can be avoided with a standard conventional loan.
thank you