USDA Loans. 0% Down, 6% Seller Closing Credit Allowed!

USDA Loans Program Guidelines

Loan Purpose

• Purchase
• One-time Close Construction Loan
• Rate-term refinance for existing USDA Loans

Credit Profile

• 620 minimum middle credit score for all borrowers on the loan – purchase
• 640 minimum middle credit score for all borrowers on the loan – one-time close construction loan
• No foreclosure, short sale, or Chapter 7 bankruptcy discharge within three years of contract ratification date on credit report not permitted
• Minimum of two tradelines on credit, with a positive pay history within the most recent 12-month period. Accounts can be open or closed
• If two tradelines aren’t on credit, alternative tradelines can be
• No mortgage delinquency in the last 12 months for a USDA-to-USDA Refinance

Loan Amount

• No maximum loan amounts

Commitment Fee/Monthly Annual Fee

• USDA charges a 1% Commitment Fee
• Commitment Fee can be financed into the loan
  Example:
  Purchase price - $100,000
  Base Loan amount - $100,000
  Commitment Fee - $1,010 ($100,000 [purchase price] /.99 - 100,000)
  Maximum financed loan amount = $101,010
• USDA requires a monthly Annual Fee (i.e. mortgage insurance premium) with an annual factorial of .35%

Ratios

• 33.99/45.99% (DTI) with GUS Accept/Eligible underwriting findings
• 29/41% debt-to-income (DTI) with GUS Accept/Refer underwriting findings and credit score less than 679
• 31.99/42.99 with GUS Accept/Refer underwriting findings and credit score greater than 680 and with compensating factors such as:
• 680 or higher credit score
• No or low "payment shock" - less than a 100% increase in proposed mortgage payment Vs. current rental housing expenses
• Fiscally sound use of credit
• Ability to accumulate savings
• Stable employment history with 2 or more in current position or continuous employment history with no job gaps
• Cash reserves available for use after settlement
• Career advancement as indicated by job training or additional education in the applicants profession
• Trailing spouse income - as a result of a job transfer, the house is being purchased, prior to the secondary wage-earner obtaining employment. If the secondary wage-earner has an established history of employment and has a reasonable chance to obtain new employment in the area
• Low total debt load

Property Type

• Must be located in an eligible USDA Rural Development Location
• Owner-occupied properties
• Existing attached and detached single-family residences
• New construction with permanent financing only
• PUD's (i.e. Townhomes)
• Condo-units. HUD, VA, FNMA or FHLMC approved project
• Log cabin homes, provided Appraisal Report lists other comparable log cabin homes that have recently sold in the area

Occupancy

• Owner occupied only
• All borrowers on the loan must have ownership in and occupy the property
• No co-signers permitted

Property Valuation

• Full USDA appraisal with interior inspection and photos

Documentation

• All loans must be fully documented per Agency Guidelines
• For Self Employed borrowers, in addition to Agency Guidelines, two years of the tax returns (personal and business) along with a year-to-date profit and loss (unaudited)

Down Payment/Closing Costs

• 0% down payment required
• Seller contribution toward buyers closing costs up to 6% of the purchase price
• Closing cost help can come from flexible sources including family member gifts and loans against a 401k retirement account
• If the appraised value of the property exceeds the purchase price, the difference can be used to cover closing costs

Terms

• Amortization period: 30-year fixed rate

Existing Properties Owned

• USDA primarily often won't allow applicants to own other properties
• Exceptions include when the other property owned is:
  • Not owned in the local commuting area as the new property; or
  • Not structurally sound and/or functionally adequate
  • Manufactured home not on a permanent foundation