Getting approved for a mortgage is becoming simpler every year. Many lenders today will be able to preapprove you in just a few minutes over the phone. The entire loan process, from beginning to end, usually takes less than 30 days. The most difficult part is often finding the right house.
The popular zero-down USDA mortgage doesn’t take any longer to complete than other loan programs despite being the lowest costing option on the market. Like competitors, USDA evaluates potential buyers based on specific criteria, although the USDA has significantly more forgiving standards.
What to expect during the USDA loan process:
After you’ve done your research and have decided the zero-down USDA loan is the best option, you must find a USDA-approved lender. The USDA loan is only offered through certain lenders that are backed by the USDA.
When you choose a lender, they will ask you a few preliminary questions about your finances and credit history.
Unlike other loan programs, USDA has income restrictions that are favorable to middle-class or lower-income individuals and families. This is because the USDA wants to provide zero-down housing assistance to people who need it in order to stimulate the economy. The income guidelines are determined by the region, average income, and number of people in your household.
If your income qualifies you for the USDA loan, the lender will then look at your credit history. USDA’s credit standards are more accepting than competing loan programs. Your FICO score must be at least a 620. The lender will look at your payment history to determine your credit worthiness. You will be required to have at least two current lines of credit with positive balances and no late payments within 30 days. You also can’t have any new collections added over the previous 12 months and there can be no outstanding federal debt or open judgements against you. If you have no credit, you can add a co-borrower whose credit meets the requirements.
After your initial review, you will need to find a house in the price range approved by your lender. For the USDA loan, your house will have to be in a USDA rural area. These areas aren’t always in the open country; there are often suburbs and small communities that fall within the rural boundaries. There is no limit on the purchase price, as long as you can budget it, and the home can be existing, newly constructed, or foreclosed as long as it passes a home inspection.
After finding the perfect house and submitting an offer, you will then wait while the lender and Title Company go through the process of preparing the funds and paperwork for the purchase. There will be no money paid out of your pocket since USDA requires no downpayment, and closing costs and fees can be financed into your loan.
Once everything has been put into place, you will meet at the Title Company to finalize paperwork. The process for obtaining a USDA loan is quick and simple.