USDA Loan Process

The USDA Loan Process with USDA Loan Info

Buying a home is one of the most important decisions in a person’s life. A home is more than a place to live; it is a step towards the American Dream of Wealth.

You get to experience the exhilaration of tackling real estate head on right up to the signing.

A USDA home loan helps those that may not have the financial means necessary to attain the dream of home ownership.

The USDA Loan Process has certain steps to follow in order to have a smooth process. The USDA mortgage is a specific loan type.

There are of course other loan types such as: FHA Loan and VA Loans but we will not touch on those in this post.

Now, a home loan coming through can be based around several factors such as mortgage rates, credit score, and the option of other loan.

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Pre-Qualify with USDALoanInfo.com Next in the USDA Loan Process

A pre-qualification provides an estimate of what you can afford based on the information you provide to your loan specialist.

Final approval is based on several factors.

A typical pre-qualification only reviews the credit score of an applicant and not their income documentation.

It gives you a starting point of what purchase price you can afford, and a home loan to look forward to.

USDA Land Loans

You'll Receive Your Pre-Approval Letter Next In the USDA Loan Process

A pre-approval is a much more comprehensive process. All of your income documentation will be thoroughly reviewed.

Once you are approved and receive your pre-approval letter, sellers are more likely to take your offers serious as you have taken the necessary steps to ensure a smooth loan approval process.

It is important to note that a pre-approval doesn’t guarantee a USDA loan. There are often stipulations that must be met in order to close and fund a USDA loan.

USDA Loan Credit Requirements

Find Your USDA Dream Home Next

Once you’re pre-approved, the next step is to find a knowledgeable or experienced realtor and start the home search.

You're in the business of real estate and becoming a home buyer, after all.

It is important to let your loan specialist know what agent you are working with and what properties you are interested in.

Your specialist will be able to determine whether the home is in an eligible area and if you can be approved for it.

USDA Loan Income Limits

USDA Loan Process and Making an Offer

After you have found your home and your loan specialist has researched the property, it is time to make an offer through the standard application process.

Your agent should already be aware that you are using a USDA loan and should prepare your offer so that the seller pays all closing costs.

If you cannot negotiate closing costs into your offer, know that the USDA loan program does allow gift funds from family and non-family members to pay for closing costs.

Additionally, if a home is bought for less than the appraised value, the instant equity in the home can be used toward closing costs or repairs.

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Processing, Underwriting & Closing with the USDA Loan Process

Once your offer is accepted and a contract is signed by all parties, your lender will need to set up an appraisal of the property to ensure the dwelling meets USDA Home Loan Standards

If a property does not meet standards, it must be fixed before closing.

During this time an underwriter will review your information to ensure that there have been no major changes since the pre-approval.

Once underwriting approves the loan and all closing conditions have been met, a closing date will be scheduled. At closing, you’ll sign paperwork, finalize your USDA loan and take ownership of your new home.

If you need guidance on succeeding as a home buyer, make sure to read our USDA Home Buyer's Guide

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Do’s and Don’ts After Pre-Approval in the USDA Loan Process

No cash deposits of any kind into your bank account. Cash is difficult to source so it has to be deducted from the ending balance on your statement.

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Don’t have your credit pulled for any reason. Inquiries can come back to haunt you with a interest rates increasing as a result

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Some home loan investors will not accept borrowers that have excess inquiries on their credit score.

These inquiries can be viewed as you being denied by other lenders. It's important to keep tight communication with your USDA Office.

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No large purchases. Large credit purchases can affect your debt ratios. So if you buy things after a lender pre-approves you, it will significantly impact your pre-approval amount.

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Try to limit the use of your credit cards. Any time balances go up and are reported to credit, it can impact your credit negatively, and again - raise interest rates!

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While shopping for a new home, you are supposed to be in pay down mode.

Anything from this moment forward must be paid for with a check or debit card from the same account you are providing to your lender.

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If possible, limit transfers. Your lender will have to provide bank statements showing where those transfers originated from.

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Respond to all email and phone requests regarding your loan right away. This will ensure that your loan closes on time.

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Don’t be late on any of your payments. Late payments on credit will affect your credit score. Being late on rent or mortgage will affect your approval.

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More than one late in the last 12 months will prevent you from being approved.

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Do not change jobs or fields of work. If you plan on doing this, please call your loan specialist before doing so.

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Your loan specialist at their USDA office will have to make sure the income from your new job will work for your loan amount. You will be responsible for your mortgage rates.

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If you are not sure about something or don’t know if it will affect your loan approval, please call your usda office loan specialist. Their job is to help you navigate through the process. And get excited - you're in the real estate game now!

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Anything from this moment forward must be paid for with a check or debit card from the same account you are providing to your lender.

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If possible, limit transfers. Your lender will have to provide bank statements showing where those transfers originated from.

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Respond to all email and phone requests regarding your loan right away. This will ensure that your loan closes on time.

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Don’t be late on any of your payments. Late payments on credit will affect your scores. Being late on rent or mortgage will affect your approval.

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More than one late in the last 12 months will prevent you from being approved.

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Do not change jobs or fields of work. If you plan on doing this, please call your loan specialist before doing so.

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Your loan specialist will have to make sure the income from your new job will work for your loan amount.

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If you are not sure about something or don’t know if it will affect your loan approval, please call your loan specialist. Their job is to help you navigate through the process.

Documents Needed for USDA Pre- Approval

  • Last 2 years of federal tax returns
  • Last 2 years of W2 forms for all jobs
  • Most recent month of paystubs
  • Last 60 days of bank statements

*Lender may require additional information*