Moreir a Team Mortgage’s SIMPLE STEPS TO A USDA HOME LOAN Written by: Alvaro R. Moreira CONTENTS | 2 Click on a section to be immediately directed to that page Introduction................................................................................................................................ 3 Chapter 1: The Smart Ways To Find A USDA Mortgage Professional........................................ 4 Chapter 2: Knowing USDA Home Loans.................................................................................... 6 Chapter 3: USDA Mortgages: Fact or Fiction.............................................................................. 8 Chapter 4: What Properties Are Eligible For USDA?................................................................. 10 Chapter 5: USDA Mortgage Basics Exposed............................................................................ 11 Chapter 6: Applying For Your USDA: Be Prepared!................................................................... 16 Chapter 7: Don’t Believe Everything You Hear.......................................................................... 18 Chapter 8: The USDA Funding Fee Explained.......................................................................... 19 Chapter 9: USDA Refinancing Program.................................................................................... 20 Chapter 10: Recap.................................................................................................................... 21 More eBooks for Home Buyers............................................................................................... 22 Contact Moreira Team.................................................................................................. 23 Moreira Team Mortgage | 404.238.7888 | moreirateam.com INTRODUCTION | 3 The United States Department of Agriculture (USDA) has developed several loans to help low- to moderate-income borrowers to purchase or refinance a home in a designated rural area. The mission of USDA Rural Development’s Single Family Housing Guaranteed Loan Program is to assist rural homebuyers achieve their dream of homeownership. For those who qualify, 100% financing is available, bringing the dream of home ownership within reach. With low interest rates and flexible guidelines a USDA home loan could help you achieve your financial goals. Many homeowners are surprised to find out how many properties just outside major cities qualify for a USDA loan even though they are anything but “rural”. This step by step guide is intended to give you all the quick answers you need to get started with the USDA program, explain all the benefits of a USDA Loans, and help you navigate the loan process. Some of the items we will be discussing are: • Defining USDA Mortgage Loans • USDA Mortgage Guidelines • How you can apply for a USDA Loan • What properties are eligible for a USDA Loan? • Can anyone apply for a USDA loan? We will also answer some common questions? • What’s the difference between a USDA Loan and a regular loan? • Why are there different interest rates? • Where can I get a USDA loan? • Why should I use a local lender? After reading this guide, you will have the exact step-by-step process for understanding and obtaining a USDA Home Loan. Moreira Team Mortgage | 404.238.7888 | moreirateam.com CHAPTER 1 | 4 Smart Ways To Find A USDA Mortgage Professional After many years of counseling USDA Once you find your USDA mortgage professional, homebuyers through some very rough waters give them the basic information that is needed with other mortgage professionals, I’m convinced to run an accurate mortgage pre-approval. They there is only one smart way to find a will then give you a good faith estimate for you to mortgage professional: review. 1. Select an experienced lender. What you should NOT do is: 2. No big box banks, dot com’s or giant internet call centers from California, Michigan or • Call around for rate quotes - There are Timbuktu. You know who they are. some loan officers who will give you a low-ball 3. A referral from a friend, family member or rate that they cannot possibly follow through co-worker that has worked with the mortgage on. This is just a deceptive ploy to get your professional is a plus. business. 4. Ask for a specific person with USDA mortgage • Compare annual percentage rates - Many experience to work with. lenders use several different factors to come 5. A lender with positive online customer up with APR. Very rarely do two banks use the reviews and an A+ rating from the Better same formula. Business Bureau. • Compare ads - The ads are to get you into 6. Lastly, an authorized direct USDA lender who the office to sign up. Mortgage companies put also has the ability to offer brokered loans. the most attractive information that applies for less than 1% of the population to bait and switch you. Why? You should not be talking to a mystery voice on the phone during the most exciting, yet stressful financial decision of your life! You need someone you can see face to face when things get rough. Someone you can locate easily whenever you have a question. More importantly, you need someone you can trust. Moreira Team Mortgage | 404.238.7888 | moreirateam.com CHAPTER 1 | 5 Once you find a good mortgage professional The reason why you should not use those three the next step is to interview him or her using methods is because they leave too much wiggle questions like: room for unscrupulous loan officers to trick you into giving your information which leads us • Do you specialize in USDA Home Loans? right into… • Are you a mortgage broker, banker or direct lender? • Are you salaried or commission based? • How many USDA loans have you personally closed? 7 Reasons Why You Should Work • Are you licensed by the state and have any With An Experienced USDA Mortgage complaints ever been filed against you? Professional or Risk Disaster • Is the interest rate you quoted me fixed or adjustable? 1. You can meet face to face to interview your • Are you locking in the interest rate and if so experienced USDA mortgage professional. then for how long? 2. You can talk to the experienced USDA • What is the fee for doing the mortgage? mortgage professional face to face if there is • What additional fees will be added to the a problem. mortgage? 3. Your experienced USDA mortgage • What will be the total principal amount of professional can attend the closing and help the loan? with any errors that show up last minute. • How much will my monthly payments be? 4. Your experienced USDA mortgage professional will be familiar with local real • What is the length of the loan? estate market trends. • Will my loan be sold? 5. Your experienced USDA mortgage • Will I have a prepayment penalty? professional will have relationships with the • If I pay for the appraisal will you immediately attorney and title company actually performing give me a copy of it when you receive it? your closing. • If I pay for the credit report will you 6. Your experienced USDA mortgage immediately tell me my score? professional will know the standard local fees • Who do I contact to get a copy of the closing that are charged. documents 24 hours before closing? 7. Your experienced USDA mortgage • How long will it take to get me an approval? professional is more likely to have a visible and easily reachable team to help out during the process. Moreira Team Mortgage | 404.238.7888 | moreirateam.com CHAPTER 2 | 6 Knowing USDA Home Loans In this next section I will cover the questions that 3. Credit. All USDA Loans require a credit score first-time homebuyers should ask their mortgage of a least 620 or higher to qualify. professional about their USDA mortgage loan. 4. Debt Ratio. You will need a debt to income ration in order to qualify. I will also review the major mistakes many new 5. Income Limit. USDA Loans have a maximum homebuyers make during the purchasing process income limits for the median income in your and help dispel some of the myths that surround area. If you make more money than the USDA loans. limit, you will not qualify. There are different brackets for determining the maximum income allowed. Those are determined by your Q & A: USDA Mortgages geographic area and the number of people living in the household. As soon as you get pre-approved by your mortgage professional it’s time to find your dream After I fill out the mortgage application, how home. Once you have placed the offer and long do I have wait for an answer? provided the earnest money deposit, if required, the next step is to complete the financing for Getting an answer on whether or not you are your home. As a new homebuyer, you should accepted for the loan you applied for can take be aware of how this process works. These anywhere from 7 to 21 days. If you are required to provide the loan officer additional documentation questions and answers will help educate you – such as an explanation of items on your credit on the process, and how this applies to a report – this could affect the time it takes to get an USDA loan: answer. The faster you provide the information, the faster you will get an answer. The lender reviewing your application will also be requesting What type of guidelines do I have to meet for an appraisal of the property, a copy of your credit a USDA loan? report, verification of your employment information and banking records. 1. Geographic Area. The home you are buying must be in one of the geographically qualifying areas which are designated as How much do I need for a down payment if I Rural for USDA Loans. qualify for a USDA loan? 2. Property Type. The home you are buying must be a single family residence. It must also USDA loans offer 100% financing, so no down be your primary residence payment is required. But keep in mind there are still costs associated with purchasing a new home Moreira Team Mortgage | 404.238.7888 | moreirateam.com CHAPTER 2 | 7 so be sure to include this into your budget or plan What about the interest rate on my loan? Is it on negotiating the seller to pay your closing costs locked in place until I close or will it change? for you. The seller can pay up to 6% of your total closing costs.