USDA Loan Questions and Answers
Frequently Asked Questions About USDA Loans:
- Can I get a USDA loan if I already own a home?
- Are USDA loans assumable?
- How much can I borrow with a USDA loan?
- How much are USDA closing costs?
- How much is USDA guarantee fee / mortgage insurance?
- How much is the down payment on a USDA loan?
- How to check USDA loan status?
- How long for a USDA loan approval?
- Can USDA loans be used for land?
- Can USDA loans be used on foreclosures?
- Can USDA loans be used for manufactured homes?
- Do USDA loans require inspections?
- Do USDA loans require termite inspection?
- Do USDA loans include new construction?
- Do USDA loans cover mobile homes?
- Can you have a cosigner on a USDA loan?
Can I get a USDA loan if i already own a home?
The rural development loan can only be used for a home that you occupy. If you already own a home, you will not be able to get a USDA loan, unless you are planning to sell your home. If you want to sell your current home, and obtaining financing through the USDA for a new rural home purchase, give us a call. This is a bit more complex and we can guide you in how to do it.
Are USDA Loans Assumable?
Yes, USDA loans are assumable, but they can only be assumed by someone who meets all of the standard guidelines for getting a USDA loan. The person who would assume the loan has to meet all of the standard guidelines, such as income eligility, not already a home owner, and everything else required for USDA financing.
How Much Can I Borrow with a USDA Loan?
The maximum loan amount that you can borrow is based upon your income. It is actually not as much based upon the total amount that you make, but the ratio of your debt versus income (debt-to-income ratio).
To determine how much you can personally borrow (after verifying eligibility), you need to total your monthly household income, calculate your monthly debts, and then see what percent of your monthly income your debts are. Do not include rent, but only student loans, auto loans, credit cards, and any other debts which require a monthly payment and show on your credit report.
The maximum percentage of your income that your mortgage payment can be is 29%. So for a $4,000 household income, the max amount your mortgage payment can be is $1,160. Now, what is the most important ratio is the total amount of your monthly debts, in addition to your mortgage payment. This is called your “backend ratio”. The highest backend ratio that is allowed is $41%. So your monthly debts and new mortgage payment together must not exceed 41% of your income. If you make $4,000/month, this equals $1,640/month.
In terms of the max loan size that someone could potentially borrow, most lenders are capped at the conforming loan limit for your county, which for most of the USA is $417,000.
How Much Are USDA Closing Costs?
The closing costs for a USDA loan vary, which depends on loan size, and other specifics to your loan. We provide what is called a “Good Faith Estimate” which shows what your loan fees will be (which is a very accurate estimate).
How Much is the USDA Guarantee Fee / Mortgage Insurance?
Use the USDA calculator half way down on this page to see how much mortgage insurance will cost for your loan. All USDA loans require a 2.00% upfront cost, as well as 0.40% of the loan balance calculated annually, and then divided into 12 monthly payments including on your mortgage payment. The monthly amount goes down each year as you pay off your loan balance.
How Much is the Down Payment on a USDA Loan?
There is no down payment required on a USDA loan. You can put money down if you would like though. If you intend to place as much as 3% down, we will help you determine which loan program is best for you by comparing your options, such as through the FHA and conventional loans.
How to Check USDA Loan Status?
If your loan is through us, call 1-800-731-3560 and you will be forwarded to your loan representative or loan processor. You can find out what the status of your loan is, including estimated close date.
How Long for a USDA Loan Approval?
Most USDA loan applications are either approved or denied within 24 hours. However, if there are any issues, or if the approval needs a senior underwriter to review the application, it can take longer. In these cases, a 48-72 hour period may be needed. The majority of applications are processed within 24 hours though.
Can USDA Loans be Used for Land?
Yes. You can use a USDA rural development loan to fund the purchase of land, but only if it is used for new home construction. You can not only buy a lot of land, nor can it be used for farming / agricultural.
Can USDA Loans be Used on Foreclosures?
USDA loans do NOT have any restrictions on purchasing a home that has foreclosed. The home must be move in ready though. It can not be in terrible shape. Also, any home, whether foreclosed upon or not, must be within eligible zones. Check the property status on the HUD website to verify it is eligible for USDA home financing.
Can USDA Loans be Used for Manufactured Homes?
You may find another lender that offers USDA mortgages for manufactured homes, but we do not offer any programs for these types of properties.
Do USDA Loans Require Inspections?
The only inspection is the appraisal itself which will provide details of the condition of the property, along with the value. It is entirely your prerogative if you want to get any other type of home inspection, such as termite inspection, but it is not required.
Do USDA Loans Include New Construction?
Yes, new construction is technically allowed, but it is a difficult loan to process. We do not offer construction loans of any type at this time. You will need to contact another local or national USDA lender if you want to finance new home construction.
Do USDA Loans Cover Mobile Homes?
Yes, but we do not offer mobile home financing with USDA loans or any type of mortgage program. You will need to speak with another lender if you want to buy a mobile home.
Can You Have a Cosigner on a USDA Loan?
Yes, cosigners are allowed. The income from the cosigning applicant must not exceed the total income allowed per household for your county. A wonderful benefit of USDA loans is that you can have a non-occupant co-borrower / cosigner on the loan. Many conventional programs will not allow this, but USDA guidelines permit a non-occupant cosigner.