Question: "In my listing area, we rarely have a home that qualifies for USDA Rural financing. I have two questions: (1) How can I tell if a particular home is eligible for a USDA Rural loan, and (2) What are the guidelines to qualify my buyer?
First, some benefits of USDA Rural
- No mortgage insurance
- 100% financing is available for non-veterans with a 3.5% GRH fee added.
- Loan amount can equal the Appraised Value, if higher than the sale price, to include the closing costs in the loan.
Question 1: Property Eligibility ~ How can I tell if a particular home is eligible for a USDA Rural loan?
Anyone (buyer or agent) can find out the eligibility of a particular property. Both single family and multi-family housing units can be eligible.
- Click this text link to open the Income & Property Eligibility Site in a new window.
- Click on Single Family or Multi Family Housing link
- Accept the disclaimer ~ they want to be sure you don't sue them...
- If you have a particular address in mind, enter it now to see if it's eligible. Otherwise,
- ...Select your State or Territory
- Select your county.
- See the Eligible and Ineligible areas, or enter an address.
Question 2: Income Eligibility ~ How can I tell if my buyer makes too much money to qualify?
- Click that same text link above.
- Click the Single Family Housing link under Income Eligibility.
- Follow the prompts for county, household, etc. It's that easy!
A Few Important Guidelines for USDA Rural Loans
Citizenship: Non-resident aliens must have a valid Green Card. Work visas are not accepted.
Credit Score: 620 or higher. Borrower must have at least two scores.
Rental History: Required with credit scores under 660.
Debt Ratios: 29% front end (House payment) 41% back end (House payment, car payment, credit card payments, student loans, and so on...) You can ask for a debt ratio waiver, but these are not easily obtained.
Compensating Factors: Compensating factors which might facilitate a debt ratio waiver include credit score above 660, job stability, recent savings and reserves, documentation that credit problems were of a temporary nature and were beyond the borrower's control ~ e.g. death of a spouse, divorce, serious illness or loss of a job, and more. Be advised by your loan officer for other compensating factors.
Please note that Debt Ratio Waivers are approved by USDA, and are not automatic.
Mortgage lates: Maximum 1 30-day-late in the previous 12 months.
Bankruptcy: Must be discharged 36 months (AZ,) and borrower must have re-established credit.
Foreclosure: Must have occured at least 36 months ago.
Refinance: Only if the loan being refinanced is a USDA Rural loan.
Non traditional credit: No longer allowed.
Student Loans: Must count, even if deferred. Underwriter will use 2% of the loan amount as the monthly obligation.
Seller concessions: Seller may contribute up to 6% of the loan amount toward the buyer's closing costs.
Termite Report / Septic Tanks: Required on purchases.
Well test: Required
Manufactured Homes: Not allowed.
I'm Mike in Tucson, your preferred Tucson Arizona Mortgage Lender.
SUNSTREET MORTGAGE llc ~ Correspondent Mortgage Bank
Offices (AZ) Mesa, Tucson, Sierra Vista, & Nogales.