Steps on how to buy the house you rent with a USDA loan
Steps on how to buy the house you rent with a USDA loan…….
Today’s topic is especially important for property managers, listing agents with properties that have tenants, and any homebuyers that want to purchase the home they are renting.
As more and more renters transition into homeownership, this is becoming a common question and today’s short video tip will walk you through the steps on how to buy the house you are renting with a USDA loan.
By the way, don’t forget to download our USDA Blueprint for Success with the link below, this complimentary guide is designed to walk you through the USDA qualifying process and is ideal for both homebuyers and Realtors alike.
So, what are the steps to buy the house you rent with a USDA loan?
With this type of scenario, the nice part is that since you are purchasing the home you already live in, we can now focus on the qualifying aspect.
Let’s get started by reviewing rental history first.
Is your landlord a private owner, property management company, or Real Estate brokerage?
This is important, because when verification of rental history is required, documentation from a company managing the rent will customarily hold more weight and strength with the USDA approval process when compared to a private landlord verification.
Do you pay rent by check, cash, or money order?
I know you have heard me say this many time in the past, but paying by check is by far and away the most concrete form of rental verification – especially when paying to a private landlord.
USDA Minimum Credit Qualifying Requirements
While minimum credit scores will allow you to get your foot in the door for initial eligibility, remember that the overall credit history will be taken into consideration which includes any previous short sales, bankruptcies, and foreclosures.
However, we are also looking for established payment histories to document the overall credit reputation of the buyer. In this case, we are looking for how many accounts have been open, active, and paid on time for at least 12 months.
Remember, in cases where accounts are not reporting on the credit report, USDA guidelines will also permit verification of non-traditional account references such as Cable, Electric, Water, and Phone bills for example.
USDA Employment History Guidelines
USDA Guidelines will require earnings to be adequate and dependable and we will need to document a 2 year work history to support qualifying.
Please remember that while at least 2 years on the same job is preferred, it is not a requirement.
Documenting a stable 2 year work history will take into consideration any job gaps of over 30 days, trends of having inconsistent job history, or short term employment in various fields. If inconsistent job history is the case, be prepared to build towards the future once an established dependable work history has been earned.