Saturday, February 27, 2010

USDA Direct Mortgage Guidelines

Many people are aware of USDA Rural Development's Guaranteed mortgage program that offers 100% financing.  The Guaranteed loan focus is on buyers in the median income level which is derived from the income in a particular country.

On the other hand not many people are aware of the USDA Direct Loan program which is also 100% financing.  The Direct mortgage program focuses on buyers with low to very low income.

Low income is defined as 50 to 80% of the median income for that county.  Very low income is 50% or less of the median income.  You can see that the direct program makes housing available to a group of people that don't have a chance of getting a mortgage in the traditional market.  Even people on a fixed income can qualify for this program.

This program also lowers the bar on credit worthiness.  Direct loans allow for alternative credit sources if the buyer does not have credit.  The underwriters are also tolerant to some collections if there is justification.  I should tell you though that they do not overlook collections for cell phone companies or cable companies and similar stuff so make sure these are paid off.

The homes that USDA will finance must be in an eligible rural area.  That usually means areas with less than 10,000 population.  You can check the eligibility of a property address from the following website: http://www.rurdev.usda.gov/

To find out if you qualify for the USDA Direct loan you should contact your closest USDA office and they will send you a pre-qualification application.  It is short and easy to fill out.  If for some reason you do not qualify they will counsel you so that you will qualify in the future.  You can locate your office from the website I just gave you.  It is a good deal.  Check it out!

You can find out more about the Guaranteed loan program from the following website:  Rural Development mortgage guidelines

If you have any questions about the loans just leave a comment and we will respond to your inquirey.
Good Luck.

18 comments:

  1. can USDA loans be for second home & investment properties?

    ReplyDelete
  2. USDA programs do not allow 2nd homes or investment property.

    However, if someone is buying a USDA REO they will still finance it if the buyer does not qualify for their regular programs due to a high income.

    The loan is at a higher interest rate and it does not have a subsidy. I think investors can use this loan but I am not sure. Contact your closest USDA Area office.

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  3. How do you start the process of applying for a USDA Mgt? Do you get pre approved like through a bank, is there a person I can contact to start the process??
    Thank You

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  4. The Guaranteed program is originated through outside lenders. You would need to contact them.

    The Direct program is originated directly by USDA. Contact your closest office and ask for a Pre-qualification application. You can find that office from www.rurdev.usda.gov

    Good Luck

    ReplyDelete
  5. Can I make an offer on a property and include cash back at the closing for updates and/or repairs? Is there an inspection aside from the one I would have for my own benefit? Does the appraiser or underwritter inspect and require certain repairs prior to closing?

    ReplyDelete
  6. Anonymous,

    The underwriter does require inspections, some they actually perform before the loan can close. Some appraisals do require repairs. Cash back at closing really does not work.

    To get more details you really need to contact the office that is doing your loan. You can find that office from this site: http:www.rurdev.usda.gov

    Good luck.

    ReplyDelete
  7. That site is: http://www.rurdev.usda.gov

    ReplyDelete
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    ReplyDelete
  10. do you have to be a female to apply ?

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  11. Gender is not a qualifying factor.

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  12. You can find our more about the guidelines at: www.usda-rural-development-direct-mortgage.com

    ReplyDelete
  13. Can you get a loan on a house that is 100 years old?

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  14. I own a property in Lewis county of the state of Washington and I would like to purchase second property also in Lewis county. The second property is about 25 miles from my current home and 1 mile from my job. What is the distance factor that determines if second property is in the same commuting area? garylb24@gmail.com

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  15. Does bankruptcy in last 4 years disqualify you from the program?

    ReplyDelete
    Replies
    1. After 3 years you would be ok as long as you have rebuilt your credit and your score is over 640.

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  16. Does a previous foreclosure disqualify you from a USDA direct loan?

    ReplyDelete
    Replies
    1. It depends on the circumstance and the time since discharge. Must be at least two years and you need reestablished credit.

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