Yesterday I did an introductory post about the USDA Loan Program, comparing it to our Stated Bonded Loan Program CHFA. In that comparisons I listed some of the benefits that each of the programs have over each other. In this blog I am going to just talk about the USDA Loan Program, and go into more detail about the program by providing bullet points that those reading this can use for a quick reference. If you are interested in more information about CHFA please read my past blogs about that program.
USDA is a great loan program for both existing and First Time Homebuyers who do not have much money to put down, or just simply want to hang on to their money for future emergencies or for needed repairs. USDA allows a Borrower to Borrow:
- Up to 102% Loan To Value (LTV).
- Can role in Closing Costs & Repairs if it can be supported by the appraisal.
- Does not have a maximum purchase price.
- Does not have Monthly Mortgage Insurance (PMI).
- Qualifying Ratio's are 29/41 and above with a Ratio Waiver.
- Minimum 620 Credit Score.
Properties that are eligible for USDA loans are:
- Existing homes
- Condominiums
- Townhouses
- 1/2 of a duplex
- Modular homes
- New construction.
- New manufactured homes built to HUD Code.
Even though USDA does not have Sale Price Limits, it does have Income Limits by household size, and they may differ from County to County and State to State. Income Limits Include:
- ALL household income.
- Seasonal/Overtime/Bonus income may be averaged based on verified history.
- Pending pay increases may be used as a compensating factor.
USDA Appraisals are done by FHA approved Appraisers and share many of the new FHA relaxed appraisal requirements, as well as further relaxing requirements of their own:
- Missing Handrails
- Cracked windows
- Dripping faucets
- Peeling paint on door frame/windows (only for houses built post 1978)
- Flat roof on garage, if it could not be inspected
- No smoke detectors
- No GFI's in kitchen/bathrooms
Additional Inspections that MAY apply:
- Septic - only if the Appraiser/inspector requests it.
- Well Water - ALWAYS test well water.
- Termite inspections are only required if State Law requires them, or the Appraiser/Inspector sees active infestation.
There you have it. I tried to keep it as brief and concise as possible, hopefully this provides enough information for those reading this to have a better understanding of this program. There is a Group here on ActiveRain named the AR Rural Development Group which contains other blogs on this program if what to read more about this.
One additional difference between State Bonded Loan Programs like CHFA and USDA, is that USDA will do Refinances and State Bonded Loan Programs like CHFA do not, except through special programs that have been recently created to assist homeowners that are at risk of losing their home.
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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