$0 Down USDA Mortgage Loan

The USDA has a no money down program that many in Florida can take advantage of!

The Florida USDA Mortgage Home Buying Program:

In 1990 the Farm Bill enacted the USDA mortgage program to help develop rural communities with a 100% financing mortgage option. The USDA mortgage program can be used for existing block, frame, or modular homes. It can also be used for new manufactured homes in Florida. The program is truly a zero down program. As with any mortgage you will still have closing costs when purchasing a home. You can however negotiate with the seller to pay all or a portion of your closing costs. Closing costs can vary but they are usually around 3-5% of the sales price. This would include items like homeowners insurance for the first year and collecting for escrows for property taxes and insurance, among title charges and taxes. Unique to this program though, you can actually finance your closing costs if the home appraises for higher than the sales price. This feature makes the program extremely flexible for borrowers wanting to keep as much of their own cash in their pocket as possible.  So for example if you are under contract for a new home for $200,000, but it appraises for $203,000, you can finance $3,000 of your closing costs. We don’t recommend this as a solid plan for getting closing costs paid for, but its a nice advantage to the program when it becomes an option. The USDA loan program has flexible guidelines in regards to trade line history. Its actually possible to use alternative tradelines like rent, car insurance, and phone bills to prove credit worthiness. If you currently have a USDA loan there is a also a great refinance program. USDA loans are one of my favorite programs to help people with because the terms are so favorable compared to other loan programs, but this program is not just for people with lower scores or less credit history!

Florida USDA Mortgage

Geographic Limitations

The program was created to help develop rural America but many cities still have eligible locations for home buyers to be able to utilize the program. Often times its a matter of finding a home on the outskirts of town but in some cases you can surprisingly buy in the middle of more developed areas. The USDA calculates area eligibility based on population density. You can search for eligible areas at the USDA property eligibility page. To search just accept the disclaimer and choose single family housing under property eligibility. You can also reach out and we will provide a map of your area. If you have any trouble with this just let us know, we would be glad to help you out. This can be the greatest challenge for some borrowers wanting to live close to a highly developed city but want to take advantage of the zero down program. You do have to be willing to live in a more rural community!

Income Limitations

The program has household income thresholds designed to limit the amount of people who can utilize the zero down program. The typical household income limit for the Florida USDA mortgage is about $103,500 for a household of 4 or less. That can be one person making $103,500 a year or 4 people combined. This figure can change from county to county depending on the median income of that county. For a household of 5 or more the household income limit is about $136,600. Certain deductions can be utilized to lower the calculation of the household income, including child care. If you’re income is close to the limit we can help you figure out if you qualify. The USDA is strict about income limits though, you will not qualify if you make too much. If you are self employed we go off of your net figures, if employed we go off our gross income. If you have a parent living with you and that parent receives social security, we would need to include that income into the calculation for household income, even though they won’t be on the loan. 

Can I Own A Home Already?

It is possible to own a home and use the program, but its a very unique situation that the USDA allows this. Generally the program is for people who currently rent or live with family. There are a few cases however that qualify. If you are retiring from up north and have your home for sale you could potentially use the program here in Florida if you qualify for both payments.  If you have a disability that requires you to change your residence, for instance if its not wheel chair accessible then you could qualify for a USDA mortgage even if you own another home. Additionally if your home no longer has enough bedrooms to accommodate the size of your family then the USDA could allow you to use the program. If you currently have a USDA mortgage and want to buy another home with a USDA mortgage you can do this as long as you close on your current home before you close on the new home. The USDA program is not a first time home buyer program but its well suited for first time home buyers.

600 Minimum Credit Score

Not every mortgage bank goes down to 600 but we do. The program does allow for you to qualify for a higher loan amount if your score is over 640 though. In some cases we can do a USDA mortgage under a 600 credit score down to 580. With scores between 580 and 640 a manual underwrite is required. With a manual underwrite the max your debt ratios can be are 29/41. That means your total home payment has to be 29% or less of your income, and your total monthly debt payments at 41% or less of your income. Keep in mind with a score of 640 you are more likely to get what’s called a GUS approval which allows debt ratios up to a 31% front end and a 46% back end.

Mortgage Insurance

The government has a 1% funding fee for the Florida USDA mortgage program. So whatever your base loan amount is, it will increase by 1% to cover their fee to keep the program going. There is also a monthly factor of .35% for mortgage insurance. This is lower than FHA or most conventional mortgage insurance. It is calculated based on the principal owed, so as the principal reduces your mortgage insurance payment reduces as well. For example if you had a $100,000 loan your mortgage insurance would be $350 a year, and $29.17 a month. The mortgage insurance on government sponsored loans is the same no matter what your credit score is.

Florida USDA Mortgage in Summary:

The Florida USDA mortgage program is an excellent program for someone wanting to purchase a home. Its true for the first time home buyer or someone wanting to buy their 5th home. If the area you are looking to buy qualifies I always ask clients to consider is as an option. Its easy to think there is a disadvantage somewhere because your aren’t making a down payment but the truth is its hard to find if there is one! Especially when compared to FHA financing. The program lets your buy a home for $0 down and gives your flexibility in the possibility of financing some of your closing costs. The mortgage insurance is low and the funding fee of 1% is low. There is often an argument that USDA loans take longer to close but the truth is we get them closed just as quick as our other loans. Once we complete our underwriting process the file is sent to the USDA for their approval. This is done under the USDA guaranteed program. Worse case we ask clients to get 40 days on their real estate contracts to close these but we are often getting them done within 30 days. This process can take a few business days, if the USDA is backed up it can sometimes take longer. If you would like to apply for a pre-approval for a USDA loan just click on the link below and we would be glad to help. If you have further questions just let us know. 

Get a No Hassle USDA Pre-Approval

A pre-approval is not an obligation, its just our way to review your file and let you know what you qualify for. With a pre-approval you can make offers on a home.

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Keith Meredith

Feel free to call or text message me directly at +1 (352) 615-1613 with any questions on any loan programs, credit score requirements or interest rates.
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