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What USDA Loan Out-of-Pocket Expenses Should You Prepare for in Florida, Texas, Tennessee, and Alabama?

January 13th, 2023 by usdaadmin

Is an earnest money deposit required on a USDA loan? 

If there is no down payment, what USDA loan out-of-pocket expenses should you prepare for in Florida, Texas, Tennessee, and Alabama? Many think that 100% financing is the same as “no money out-of-pocket”, but just because there is not a down payment involved, minimum USDA loan out-of-pocket expenses may still be required.What are USDA Earnest Money guidelines in Florida, Texas, Tennessee, and Alabama


In today’s short video, I will discuss what expenses to be prepared for even when you are qualifying for USDA No Down Payment 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 step-by-step and is ideal for both homebuyers and Realtors alike.

What USDA Loan Out-of-Pocket Expenses Should You Be Prepared For in Florida, Texas, Tennessee, and Alabama?

It is common for a buyer to prepare for two types of USDA loan out-of-pocket expenses. These include their down payment and settlement charges, a.k.a. closing costs.

When getting a No Down Payment USDA rural home loan, the down payment requirement is eliminated, but additional minimal USDA loan out of out-of-pocket expenses may still apply such as:

I. USDA Loan Out-of-Pocket Expenses: Earnest Money Deposit (EMD)

Per the National Association of Realtors

Earnest money is a payment from the potential buyer to the seller to show good faith in their intent to complete a real estate transaction.”

What USDA Loan Out-of-Pocket Expenses Should You Be Prepared For in Florida, Texas, Tennessee, and Alabama?

While a USDA loan earnest money deposit is not required for loan qualifying, the amount of any deposit would be commonly negotiated between the buyer and seller and then listed on the sales contract.

With a USDA loan it is possible to receive all or a portion of the EMD back at closing, but this is dependent on what the home appraises for and/or how much you may be receiving from the seller towards closing costs.

Neither the appraised value or seller concessions is a guarantee so homebuyers must be prepared to account for any costs that may be owed at closing.

Please remember that as part of the approval process, we will always need to verify the USDA loan earnest money deposit.

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II. USDA Loan Out-of-Pocket Expenses: Appraisal Fees & Inspections

These are customary upfront USDA loan out-of-pocket expenses that should be paid by either check or credit card when the option is available because both of these forms of payment will allow for verification if needed.

Settlement charges are made up of both closing costs & pre-paid items which may be financed into a USDA loan. USDA loan out-of-pocket expenses may be included within the loan amount only if the appraisal is higher than the sales price. A higher appraised value would then allow you to finance and include those USDA loan out-of-pocket expenses into the increased loan amount. 

III. USDA Loan Out-of-Pocket Expenses: Seller Paid Closing Costs (Seller Concessions)

USDA guidelines allow the seller to pay up to 6% of  the sales price towards a buyer’s settlement charges.

While a seller may or may not agree to this, provided it can be negotiated as part of the sales contract, this is another way to help reduce a buyer’s out-of-pocket money due at time of closing.  As mentioned above, receiving seller concessions towards your closing costs is never a guarantee so homebuyers must be prepared to account for any USDA loan out-of-pocket expenses that are owed at time of closing.

Additionally, if any funds are owed by the buyer at time of closing, the Earnest Money Deposit will be credited towards that amount.

Remember, when you think USDA loans, think Metroplex Mortgage Services!

The Metroplex team has been the trusted resource for USDA loans since 2001!

We thank you for the continued recommendations!

800-806-9836 Ext. 280

Just call or email if you have any qualifying questions, want to discuss a new scenario, or would just like to take advantage of our free 2nd opinion service which is great for those existing transactions

I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!

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