Q: Do I need to be a first time homebuyer to qualify for USDA financing?

A: No.

Q: I had a bankruptcy. Am I eligible for USDA financing?

A: Yes, as long as 3 years have passed since the discharge of the bankruptcy.

Q: I had a home that was foreclosed. Am I eligible for USDA financing?

A: Yes, you may be eligible. The waiting period for a foreclosure is 3 years from the date of the foreclosure. If you are not sure of the exact date, please call me. If the property was located in Florida, I can check with public records for you.

Q: Do I have closing costs when I finance a home with a USDA mortgage?

A: Yes, a USDA mortgage will have closing costs similar to other mortgages.

The closing costs can be paid in one of the following ways:

  • Paid by you as the buyer.

  • The seller can make a contribution towards the closing costs (seller closing cost credits).

  • The lender may offer a closing cost credit to cover some of the costs.

  • If the home appraises for more than the purchase price, the mortgage amount can be increased to cover the costs (Unique to USDA financing).

  • Any combination of the above.

Q: Are interest rates higher on a USDA mortgage then other mortgage loans?

A:  No, in fact the interest rates on a USDA mortgage are currently lower than the interest rates on conventional mortgages.

Q: My credit score is not great. How will this impact my interest rate?

A: One of the many great features of the USDA mortgage, similar to other government loans such as FHA and VA mortgages, is that you get a low interest rate even if you do not have very high credit scores. So long as you have the minimum score to qualify, you will get a low 30 year fixed interest rate.

Q: Do USDA mortgages take longer to close than other mortgages?

A: One unique difference between the USDA guaranteed mortgage and other mortgage programs is that once we as the lender have fully approved the mortgage, the loan package must then be electronically sent directly to USDA for review. Presently this is adding less than 10 days to the process from application to closing. Fairway Funding requests a sales contract with a minimum of 45 days to close.

Q: If we use only one spouse for qualifying the mortgage, do we have to include the non-borrowing spouse’s income in the maximum income qualification?

A: Yes, the USDA mortgage has a maximum household income threshold; it is the entire household income for all adults living in the home that is used, even if one or more party’s income is not being used to qualify the mortgage.

Q: What are some of the benefits of a USDA mortgage over an FHA mortgage?

  • The USDA loan is 100% financing, FHA requires 3.5% down.

  • FHA has a higher upfront and higher monthly mortgage insurance premium.

  • If the home appraises for an amount greater than the purchase price, the mortgage amount can be increased up to 100% of the appraised value to cover closing costs.

Q: What are some reasons that I may qualify for an FHA mortgage but not for the USDA Guaranteed Mortgage?

  • FHA allows for higher debt to income ratios, it is possible that you may exceed the maximum debt to income ratios for USDA but meet the debt to income ratio guidelines for FHA.

  • USDA is only available in eligible areas, where FHA is not limited to location.

  • Household income may exceed the USDA limits for your area.

  • FHA will allow for slightly lower credit scores, as low as 580.

Q: Do I need to take a homebuyer education course before being approved for a USDA mortgage?

A: No, there is no homebuyer education required.

Q: If I don't have enough money to qualify for a USDA mortgage, can I have a co-signer?

A: No, USDA does not allow for Non-occupant co-borrowers (co-signors), If you need to include a non-occupant borrower then FHA or conventional financing may suit your needs.

Q: Is there a maximum loan amount for a USDA mortgage?

A: The maximum mortgage amount is the same as the conventional mortgage limit of
$453,100. However, as you must stay within the debt-to-income limits, it is often difficult to qualify for an amount this high and still meet the ratios. A family of 5 or more which allows for higher household income, who has low consumer debt obligations including car loans, student loans, and credit cards may be able to qualify for a purchase price at this level.

Q: Does USDA inspect the home?

A: No, there is no special inspection of the home performed by USDA. The home will be appraised by a licensed appraiser who will appraise the property for value. The appraiser is not a home inspector; he/she is appraising the property for value. If there are any obvious deficiencies with the home, then it is the appraiser’s responsibility to note this in the appraisal.

Q: If the USDA mortgage allows for 100% financing, do I have to put a deposit down when I contract to purchase a home?

A:  Although a deposit is technically not required, you would be hard pressed to find a seller, who will sign a contract without an earnest money deposit being placed in escrow with either the realtor or a title company. Your real estate sales professional will be able to best advise you as to the amount required for deposit.

Q: Can I purchase a condominium with a USDA mortgage?

A: Yes, the loan can be used to purchase a condo, so long as the condo is located in a USDA eligible area, AND the condominium is either FHA or VA approved OR meets the condominium financing requirements for Fannie Mae or Freddie Mac. The fact that condominiums can be financed with a USDA mortgage is a well-kept secret, that many are not aware of.