USDA Loan for Homebuyers: How it Works

• Income limit. The USDA loan program is restricted to low-to-moderate income borrowers. This means that you will need to make less than a certain amount of money a year to qualify for this program. Currently this yearly amount in Florida equals to $82,700 for a family of four or less.
• Geographic restrictions. For you to be eligible for a USDA home loan, you must buy a house that is located in an eligible area. You can search the address on the USDA eligibility site to check if the house you want to buy qualifies as located in a rural or suburban area.
• Credit score and DTI. The USDA eligibility guidelines generally require a credit score of at least 620 and less than 50% DTI (debt to income ratio) from borrowers who want to qualify for these mortgages. However, even those who don’t meet these criteria can still apply for USDA loans on different terms.

Once you are certain you qualify for the USDA mortgage program, it is time to gather the necessary paperwork. You will need:

• W-2 forms for the past two years
• Tax returns for the past two years
• Pay stubs for the last month
• Bank statements
• Credit report
• Social Security awards letter (if retired)
• Asset statements for the past two months

You will need this information to apply for prequalification. It is a free process and you can apply with several lenders to compare them and consider the best option. They will let you know if you qualify for the program, how much you can afford, and what loan terms to expect.

When you choose the best option among the available lenders, you will need to apply for pre approval. The process of pre approval is similar to prequalification but is paid, involves a thorough examination of your financial information, and gives you a guarantee that the lender is willing to work with you if you get pre approved.

Afterwards, you need to find the house you want to buy. A Real Estate Agent will show you options that suit your needs and budget and help you deal with sellers. Once a seller accepts your offer, the house needs to be appraised. The lender will approve the loan only if the house is located in an eligible area, meets the USDA property standards, and is priced at or below its appraised value.

Next comes the underwriting process, which can take more or less time depending on your personal situation. If your credit score is less than 620, your loan will have to undergo manual underwriting, which requires more paperwork and takes longer. After this step is done, you only have to close the deal and move in.