The USDA Loan Process Step-by-StepÂ
USDA home loans offer eligible rural and suburban homebuyers an excellent opportunity to purchase a home without a down payment. Plenty of properties are available in rural areas that can make great homes and become yours at favorable loan terms.
USDA loans are backed by the Department of Agriculture and aim at helping rural communities maintain and even grow their populations. If your lifestyle or work can support living in a rural area, then a USDA loan could be the perfect match for you. Remember that some suburban areas qualify for a USDA loan, so you could benefit from proximity to a town while still getting a USDA loan for your home.
Let’s go through the USDA direct loan process step-by-step.
1. Check Your Eligibility
Before beginning the application process, determine if you meet the USDA loan requirements. If you are interested in a specific location, check that it’s eligible under the USDA requirements.
Next, check that your income falls within the USDA limits for your area, as these loans are designed to assist low to moderate-income borrowers. The current income limit for 2024 is $112,450 for a one-to-four-member family.
Finally, check your credit score. While the USDA doesn’t set a minimum credit score, most lenders require a score of 640 or higher.
2. Gather Necessary Documents
If you have all documentation and paperwork ready beforehand, you can streamline the application process. You’ll need to collect proof of income, including recent pay stubs, W-2 forms, and tax returns from the past two years.
Gather your bank statements for the last few months to demonstrate your financial stability. You’ll also need identification documents such as your driver’s license and social security card as well.
Finally, be prepared to provide information about your rental history and current employment for verification purposes.
3. Find a USDA-Approved Lender
Not all mortgage lenders offer USDA loans, so find one specializing in this financing type. Society Mortgage is a reliable mortgage lender, and we provide USDA loans.
4. Get Pre-Approved
Once you’ve chosen a lender, submit your financial information for pre-approval. This process involves a preliminary review of your credit, income, and assets.
If approved, you’ll receive a pre-approval letter stating how much you can borrow. This letter is valuable when you start house hunting, as it shows sellers you’re a serious buyer. It also gives you an idea of how much home you can afford.
5. Find a Home
With your pre-approval in hand, start searching for your new home.
Work with a real estate agent who is familiar with USDA loans and the specific requirements for eligible properties. They can help you find homes that meet USDA criteria and guide you through the offer process.
Finding a home can take time, but it’s much easier if you can be flexible about the size and exact location of your home.
6. Make an Offer
When you find a home you like, it’s time to make an offer. Your real estate agent will help you draft a competitive offer based on comparable sales in the area. Be prepared to negotiate with the seller on price and terms.
7. Complete the Loan Application
After your offer is accepted, you’ll need to complete a full loan application with your chosen lender, such as Society Mortgage.
You may need to provide additional documentation to support your application at this stage. Your lender will also order an appraisal of the property to verify it meets USDA standards and determine its value. Lenders want to ensure that the amount they are lending you matches the home’s value. For example, they won’t lend more than the home is really worth.
8. USDA Underwriting
Once your application is complete, the underwriter lender will submit it to the USDA for approval. The USDA will review your application and verify the property’s eligibility in terms of overall condition and location.
This additional step means that USDA loans can take longer to process than conventional loans, so you will have to be patient.
9. Close on Your Home
If your loan is approved, all that’s left is closing the deal. You will review and sign the final loan documents and pay any closing costs. You will then receive the keys to your new home. Your lender will guide you through this process and explain any fees or final requirements.
Apply for a USDA Loan Online
USDA loans are a great way to buy your home in a rural area. They require no down payment and come with competitive interest rates to help low and middle-income households access the property ladder.
These loans have lower mortgage insurance costs. As a bonus, if closing costs are stressing you, there are ways to roll them into the loan to facilitate your budgeting. However, due to the additional approval step, the USDA loan process may take longer than that of conventional loans. Even so, it’s often worth the wait!
Start your online application early and stay in close contact with your lender throughout the process. And if you have any questions, our Loan Officers are happy to give you all the information you need to begin your application. Let Society Mortgage help you buy your forever home and achieve your goal of homeownership!
Frequently Asked QuestionsÂ
How long does USDA loan approval take?
The process typically takes from 30 to 60 days. During this period, you need to consider the time needed for processing, underwriting, and approval, and of course, other varying variables such as the complexity of your application, current workload of the loan office or the responsiveness of required documentation.
How to apply for a USDA loan online
Go to our societymortgage.com webpage and follow our easy and convenient process. Fill in the gaps with the required information, including details about your personal and financial situation and information about the property you are interested in. Soon enough, one of our specialized Loan Officers will reach out to guide you through the next steps and answer any questions you may have.
