How to Get a Guaranteed USDA Loan
The U.S. Department of Agriculture (USDA), through its Rural Development program, insures mortgage loans. For homeowners who are buying a home in an eligible area, the benefits of a USDA-guaranteed loan are many: These loans don't require any down payment. Borrowers can rely on gifts from family members or friends to pay their closing costs. And they can include the costs of repairs or improvements of a home in the loan's cost. Fortunately, getting one of these loans is a fairly straightforward task.
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Things You'll Need
- Copies of your last month's worth of paychecks
- Copy of your last two federal income tax returns
- Copies of your bank savings and checking account statements
- Copy of your most recent federal income tax return
- Copy of your credit card statements
- Copy of your other loan statements, including auto, student or personal
Instructions
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1
Gather the financial papers that you'll rely on to convince your lender that you have a high enough gross monthly income and low enough monthly debt level to qualify for a USDA-guaranteed loan. Lenders like to work with borrowers whose monthly debt obligations, including their new mortgage payments, are less than 36 percent of their gross monthly income. Make copies of the financial papers listed in the "Things You'll Need" section of this article.
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2
Call a mortgage lender and explain that you'd like to apply for a USDA-guaranteed loan. Though the USDA guarantees its Rural Development home loans, it does not actually originate them. Private lenders and banks do that. Be sure to shop around for the lender or bank that promises the lowest origination fees and interest rates.
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3
Make sure that the home you'd like to buy is in an USDA-eligible area. You can find these locations, which are spread out across the United States, by logging onto the USDA's home-loan eligibility site (See Resources).
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4
Give your lender permission to check your credit. Lenders rely on your three-digit credit score to determine if you are a risky or safe borrower. Lenders consider scores under 620 to be the sign of a borrower who is more likely to default. Therefore, they'll charge these borrowers higher interest rates.
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5
Send your lender the copies that you made in Step 1. The lender will study these to make sure that your gross monthly income is high enough and your monthly debt obligations low enough. Lenders generally want your monthly debt levels, including your new mortgage payment, to be less than 36 percent of your monthly debt obligations.
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6
Agree to a closing date if your lender approves your USDA-guaranteed home loan. At the closing table, you'll sign the papers that make your new mortgage loan official. You'll also pay any required origination, title and closing fees.
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Tips & Warnings
Shop around for your lender. Closing and origination fees vary widely from lender to lender. The latest closing costs survey by Bankrate.com estimated that the average origination and title fees for mortgage loans stood at $2,732 in 2009.
References
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