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How does a first time home buyer qualify for a USDA loan?

August 1st, 2014 by Sean Stephens

How does a first time home buyer qualify for a USDA loan?

USDA Home Loans are sought after by First Time Home Buyers and today’s video tip will keep you in the know about key points on how to qualify for a USDA loan.

Before we get started, here are a few of the benefits which many first time home buyers seek out in USDA loans:

*100% Financing.

*USDA loans offer the Ability to finance out of pocket settlement charges in cases when the appraised value is higher than the sales price.

*No maximum loan limits. Mortgage amounts are determined by loan qualifying, thus not restricting qualified applicants by setting loan limits like FHA or Conventional.

*Flexible credit qualifying.  While minimum credit conditions are required, exceptions can be made for certain situations with previous adverse credit.

So How do First Time Home Buyers qualify for a USDA Loan?

The subject property being purchased, must be located in an approved USDA Rural     Development area.  There are no exceptions to this policy.  Eligible areas can vary per county, so be aware when planning to look for homes.

There are income limitations based on family household size.  Remember that USDA loans take into account income from all family household members, not just who is on the loan.  This can be complicated, so contact us for any specific questions.

USDA eligible areas and income limits can be found directly at the USDA website.

Minimum credit qualifying required.  Automated approvals through the GUS underwriting system start at a minimum credit score of 640, and we are able to offer manual underwriting with scores down to 620.

Please note that credit scores do not guarantee approval and further review must be done to establish the applicant’s credit reputation.  Minimum requirements are to document at least 3 acceptable trade line payment references which have reported for at least 12 months .

These may be verified through a credit report or through the use of manually verifying non-traditional accounts such as water, electric, or telephone bills for example.

Verification of rent is not always a requirement, but being able to document housing payment history can go a long way towards loan approval.  Remember that while paying in cash may be convenient, traditional forms of rent are done through cancelled checks along with apartment complex or management company verifications, and in some cases money order receipts.

Being able to document that a homebuyer has funds in reserve after closing is always a positive.  Being able to document a responsible savings pattern and show funds in a checking, savings, or 401K account help to support and strengthen USDA loan qualifying.

Lastly, remember to forward and share this video to any buyers looking to purchase a USDA loan and have them download our USDA Blueprint for Success with the link below.  This will walk them through the process step by step and is also a good resource for any Realtors.

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