Frequently Asked Questions About USDA Loans

Why haven’t I heard much about USDA rural development loans here in Bastrop?

There was a myth that only rural farms could qualify for a USDA Mortgage Loan here in Bastrop. Also there were other popular home loans that offered zero down payment and easy qualification in the years past.  Now mortgage lending programs are much tighter and the USDA Rural Development Loan is one of the few remaining programs with 100% financing and very favorable terms.

How much money will I need to close?

Every transaction is different. You will usually need to pay $350 for an appraisal before closing. You can ask the seller to pay all other closing costs as long as the total amount (closing costs, escrow, 2% Fee and interest) are not more than 6% of the selling price. You may also roll your closing costs into your USDA loan.

Will the seller usually agree to pay my closing costs?

This is very common. It depends on the real estate market in your area and how motivated the seller is. Note that the appraisal will need to be equal or greater than the selling price for the closing cost seller contribution to work.

How large of a mortgage do I qualify for?

The loan officer can calculate this for you. Usually the total debt to income ratio including the PITI should be 48% or less than your monthly gross income.

How good does my credit need to be?

If your credit score is above 620 you will have a very good chance of qualifying. While this alone does not guarantee you will qualify it is necessary.

What if I have NO credit in the credit bureaus?

You will not be able to qualify without a minimum credit score of 620.

Can I have had a Chapter 7 or Chapter 13 Bankruptcy?

The short answer is Yes, however Chapter 7 Bankruptcy does require a 36 months seasoning. Chapter 13 requires a 12 month seasoning and if you are still in Chapter 13 you have to show that you have made your payments on time for the last 12 months. Obviously all other qualifications have to be met as far as credit scores, debt to income ratios and so on.

Is private mortgage insurance required?

Yes, USDA recently implemented a very small monthly mortgage insurance of .3%. This is currently about 1/4 that of FHA. USDA also lowered its up front fee from 3.5% to 2.0%.

How does this program compare to a FHA mortgage?

In most cases the USDA mortgage will be better than FHA if you qualify. USDA is 0% down and FHA is 3.5% or more down. Also FHA charges a monthly Mortgage Insurance fee which is 1.15% and USDA has a monthly Mortgage Insurance of .3%. The rates are normally very comparable.

Can I Refinance my FHA or Conventional Mortgage into a USDA Mortgage?

No. USDA will only allow a current USDA Mortgage to be refinanced into a USDA Mortgage.

Will USDA loan on homes to be built?

No. The home has to be built for USDA to lend on the home.

What types of homes can qualify?

The home must be owner occupied, no investment property will qualify. The home must also be either a single family home, condo or planned unit development. NO MANUFACTURED or MOBILE HOMES will qualify.

Are swimming pools an issue with USDA?

Yes, USDA will back the value of the pool out from the sales price and only lend on the home.

How long does it usually take to close a rural mortgage?

This can vary, four to six weeks is typical.

Do I have to put a down payment?

Loans may be for up to 100 percent (102 percent if the guarantee fee is included in the loan) of appraised value or for the acquisition cost, whichever is less.

If I am ready to get started, what is the first step?

Visit our apply page and a mortgage specialist will contact you ASAP to start the process.

If you have a questions about a USDA Loan not found on here, please contact our USDA Loan Specialist at josh@jkohlmortgages.com.

If you have questions about which homes are eligible in Bastrop County for the USDA Program contact our real estate agent Wray Rivera at letstalk@wrayrivera.com.