Do USDA Loans require an Earnest Money Deposit?
Typically, when purchasing a home, a buyer will have two types of out-of-pocket expenses: down payment and settlement charges.
With a USDA no down payment loan, the burden of a down payment is eliminated. However, remember that no down payment is not the same as “no money out-of-pocket“, because other costs may still apply such as an earnest money deposit, appraisal fees, inspections, closing costs, and pre-paid items.
In today’s’ video I will review customary out of pocket costs which includes details on any requirements for the earnest money deposit (EMD).
Have you viewed any of our FREE USDA resources? Whether you download our USDA Blueprint for Success or our Guide to USDA Financing for New Construction your knowledge will grow about the USDA qualifying process!
What is an Earnest Money Deposit (EMD)?
Earnest money is a deposit on the house you want to buy. It is used to show sellers that you are serious about buying their home and it is a good-faith gesture towards the purchase.
USDA Loans and an Earnest Money Deposit
While no down payment USDA loans do not require an earnest money deposit, it is customary for a buyer and seller to agree upon an EMD. Plus, as part of the approval process, the deposit will need to be verified.
Additionally, if any funds are owed by the buyer at the time of closing, the Earnest Money Deposit will be credited towards that amount.
Can you get your earnest money deposit back?
At the closing of a USDA loan, it’s possible to receive all or a portion of the EMD back, but it’s not guaranteed. Return of any EMD is dependent on the appraisal of the home or if the seller is paying any of the buyer’s settlement charges.
Other Possible USDA Out-0f-Pocket Expenses
- Appraisal Fees and Inspections
- Appraisal fees and inspections are customary out of pocket expenses. They should be paid for by check or credit card when the option is available. Both forms of payments will allow for verification if needed.
- Closing Costs and Pre-Paid Items
- These can be financed through a USDA loan only when the appraisal is high enough to allow for the increased loan amount.
- Buyers can attempt to negotiate with the seller to pay towards their closing costs to help reduce this expense, but this depends on what amount the seller is willing to negotiate.
USDA loans offer no down payment financing, but that is not the same as no money out-of-pocket! We have reviewed all the possible out-of-pocket expenses and you can see that the details are vital to the success of the purchase. As an approved USDA lender, our expertise allows us to help home buyers make the most of their qualifying ability.
Do you have any questions? Just call (800) 806-9836 Ext. 280 or email SeanS@MPLX.org to discuss your scenario. We are excited to show you the “Metroplex” difference!
Feel free to download any of our USDA free resources and make it a great day!
Can you finance a pool with a USDA loan?
When it comes to USDA loan swimming pool guidelines there is still the myth that USDA loans will not finance a home that has an in-ground swimming pool – but that is simply not true!
In today’s video, I will separate fact from fiction by comparing and contrasting previous outdated USDA loan swimming pool financing requirements with today’s modernized USDA loan swimming pool guidelines.
However, before we dive into USDA loan rules and regulations for in-ground pools don’t forget to download our USDA blueprint for success with the link below. This exclusive free guide breaks down the USDA loan process step by step and is a great educational resource for the home buying process!
Can you finance a pool with a USDA loan?
While this may just be a reminder to some, I still come across both Realtors and lenders who think that USDA home loan restrictions will not allow homes with in-ground pools.
Today’s video will provide the important facts that buyers, sellers, and their Realtors need to know when dealing with your next USDA loan that involves an in-ground swimming pool.
As a reminder, prior to 12/1/14, properties that had in-ground swimming pools were not considered within USDA’s modest housing definition.
Now, even though that was the case, one myth that existed was that USDA loans would not finance homes with in-ground pools, but this was simply not true. Although financing was still available, there would be no value credited to the pool which was challenging to say the least!
As you can imagine, this previous USDA loan requirement created confusion among appraisers, Realtors, and homebuyers.
However, thankfully that is all a thing of the past, because effective way back on 12/1/14 under the new USDA 3555 handbook, guidelines for homes with in-ground swimming pools have been updated to now simply state: “The agency may approve dwellings with in-ground swimming pools”
Three Easy Tips to Remember about USDA loan swimming pool guidelines:
- USDA loans will allow homes with in-ground swimming pools
- This has brought the program into line with FHA, VA, & Conventional appraisals
- Business as usual for eligible properties with in-ground swimming pools!
Make sure to share the good news with any listing agents or sellers when your next offer involves USDA loan financing with a home that has an in-ground swimming pool.
As always, please feel free to reach out to my team of USDA home loan experts with any USDA property eligibility questions.
As a reminder, not all lenders have experience with processing and closing USDA loans. Our dedicated team of loan professionals is here to answer questions and provide solutions regarding the USDA home loan program.
As an approved USDA lender, Metroplex Mortgage Services is known for our program expertise and having specific systems in place to process USDA home loans from pre-qualification to closing.
800-806-9836 Ext. 280
Just call or email if you have any USDA loan qualifying questions, want to discuss a new scenario, or would just like to take advantage of our free 2nd opinion service which is great for those existing USDA loan transactions.
I want everyone to make it a great day and look forward to seeing you right here for the next tip of the week!
What are USDA Loan Well Water Requirements?
In the rural communities that we serve, you can probably guess that this is a common question. However, it is surprising that some lenders do not even know there are USDA loan well water requirements!
For example, I was recently told by a Realtor that a loan officer for a large online lender had told them that private well water tests were not required on USDA loans. Needless to say, that agent was driving around the day before closing scrambling to get a water test because that lender finally realized that USDA requires it!
In today’s short video I will break down the details to help you understand USDA loan well water requirements.
With that being said, make sure to take advantage of FREE USDA LOAN BLUEPRINT FOR SUCCESS this guide is designed to walk you through the USDA process step-by-step for both home buyers and realtors alike!
What are USDA Loan Well Water Requirements?
Private wells are common throughout rural communities and understanding the USDA loan well water test requirements are extremely important towards keeping the timing of your transaction on track.
Pursuant to the USDA 3555 handbook guidelines, USDA loan requirements for “individual water systems” that are owned and maintained by the homeowner, must meet the requirements of the local and/or State Health Authority codes.
Additionally, USDA loan well water testing requirements include the following
- The water quality of the well must meet the requirements of the state or local authority. If the state or local authority does not have specific requirements, the maximum contaminant levels established by the Environmental Protection Agency (EPA) will apply.
- The local health authority or a state certified laboratory must perform a water quality analysis. The Safe Water Drinking Act does not apply to private wells.
- The well location for individual water supply systems must be measured to establish the distance from the septic system. The separation distance between the well and septic systems must meet the SF Handbook (HUD Handbook 4000.1.) or be found acceptable by the local and/or State Health Authority.
- Individual water systems/wells should be located on the subject property site. If located on an adjacent property, evidence of water rights and recorded maintenance agreement must be retained in the lender’s permanent loan file as acceptance of the well as the primary source of water.
In summary, when it come to USDA loan well water requirements, don’t be scared – be aware!
As a USDA Approved Lender we offer in-house underwriting and are known for our extensive USDA home loan knowledge and experience. Remember to make sure are use my team as a resource and call if you have any specific questions about USDA loan well water testing requirements so we can review and advise.
As you know by now, USDA loans are a core focus of my entire team, and we are dedicated to making your USDA home loan process simple and easy! As an approved USDA lender Metroplex Mortgage Services is proud to serve our rural communities.
Just call or email to discuss your scenario and let us show you the “Metroplex” difference!
(800) 806-9836 Ext. 280
We hope you make today a great day, and as a friendly reminder don’t forget to download our USDA blueprint for success, and check out our weekly blog posts for more USDA loan tips!
Last week, we reviewed five important things to do during the USDA loan application process. In contract today, we will detail what NOT “To Do” when seeking USDA mortgage approval.
Today’s video is a great reminder of how fragile the loan approval process can be and provides important tips on how to keep your mortgage application headed towards the closing table!
Now, before we get started, remember to download our USDA Blueprint for Success with the link below. This free guide is designed to walk you through the USDA application process and is a great educational resource for both homebuyers and Realtors alike.
USDA Loan Application: What NOT “To Do”
Made famous by Benjamin Franklin, the saying “an ounce of prevention is worth a pound of cure” still holds true today, especially in the mortgage application process! It is important to be proactive and limit mistakes which could come back to haunt you during USDA loan underwriting phase.
As such, here are some common pitfalls to avoid during the USDA mortgage application process:
Do NOT Open or Apply for New Credit!
Consumers today are being barraged with an onslaught of offers for credit! While those pre-approved credit offers may be enticing, it is important to not incur any new debt during the application process. It is critical to NOT respond to these offers for credit. Be proactive and do not put yourself in a situation where your USDA loan application could be denied.
Whether it be new furniture, an auto loan, or a new credit card, opening new debt can have a two fold effect. Any additional inquires can be a factor towards lowering your credit score and any new debt incurred can affect your debt ratios.
When Should You Not Payoff Negative Credit Accounts?
While many may think that making a payment on a negatively reporting credit account such as a collection or charged-off account would help your USDA loan application, the results could be the exact opposite!
As crazy as it sounds, this could actually hurt your USDA loan approval chances due to the impact it could have on your credit score. For example, if the account in question has not recently reported to the credit bureaus, making a payment can have the effect of updating the most recent activity along with the reporting date. Now, everyone’s credit is different, so just be careful to analyze the details before making a payment on a negative account.
While paying off a negative account may be a condition of loan approval, make sure to discuss any such requirement with your lender. With our credit experience, the Metroplex team can provide the proper advice for you to weigh the pros and cons before making a payment on any negative credit accounts.
Do NOT Increase Credit Card Balances
Maintaining appropriate credit card balances in comparison to your credit limits is an essential factor towards keeping your credit scores high!
When your credit card balances increase, this can be one of the quickest ways to lower your credit score. Also, an increased credit card balance also leads to increased minimum monthly payments which can negatively impact your debt ratios.
Remember to keep your spending in check, because higher credit scores can significantly help your USDA loan application!
Do NOT Close Credit Card Accounts!
As mentioned above, it is important to keep appropriate balances in comparison to your credit limits.
However, closing out a credit card eliminates any available credit which can have an almost instantaneous negative impact on your credit score. This can impact the very important ratio between your credit card amount owed and your available credit limit.
While you may think that it is a good thing to close out your credit card, this could actually hurt your credit and USDA loan approval.
Do NOT Make Unverified Bank Deposits.
The USDA underwriting process will require verification of deposits along with the source of where they come from. while frustrating, even small amounts may have to be verified. This is a process referred to as source and seasoning.
Many think that by depositing cash into their bank account it will show that they have more assets and help their mortgage application. However, if we are unable to verify and give credit for that deposit, this could actually hurt your USDA loan approval chances.
While this is not an exhausting list of what you should NOT “To Do” during the USDA loan application process, it is important to stay proactive!
If you have a qualifying question or a loan approval that is experiencing trouble, remember that I started the company way back in 2001. Let our experience be a resource for you!
Plus, you can download any of our FREE USDA Resources here. These ready to download PDFs will answer your pertinent questions.
As always, I want to thank everyone for the continued recommendations and trusting us with all of your mortgage needs.
What are Five Things “To Do” for a Successful USDA Mortgage Application?
Submitting your USDA mortgage application, looking for the right home, and preparing an offer are all part of purchasing a home.
However, because of the overwhelming amount of information, it is important to not let important financing details slip through the cracks. Understanding what are the right and wrong things “to do” during the USDA mortgage application process can go a long way!
In today’s short video tip, I will discuss five important things “TO DO” in order to keep your USDA mortgage application headed in the right direction. Additionally, you can always use these FREE USDA Resources to help each step of the way!
5 Things “To Do” for a Successful USDA Mortgage Application
1. Keep your payments on-time!
As you can imagine, late payments on your credit report can have a major negative impact on your credit scores which in turn can hurt your USDA mortgage application process. We realize life that an oversight can happen and while it may not be intentional, understand that the impact will be the same.
It is critical to stay organized with your finances because just one 30-day late payment can stop the loan process in its tracks.
2. Manage your credit card balances
It is very important to monitor and keep your credit card balances low in comparison to your credit card limit. In fact, it isn’t the balance that counts, but the ratio of your balance when compared to your credit limit.
Having credit cards that are maxed out or near their limit can be a major contributing factor in lowering your credit score.
Remember, it is also equally important to not close out credit cards account! Once you pay off and close out an account, you are also eliminating the available credit that comes along with having a low balance.
3. Don’t let medical collections become an issue!
Often, I see a small medical collection that was a result of miscommunication between the insurance company, doctor’s office, and the patient. This can rapidly decrease your credit scores and in some cases can be a reason for loan denial.
After you have a medical procedure, it is important to stay on top of the billing and any potential invoices that may be outstanding.
4. USDA Verification of Rental History
When rental history is required, paying by check is a clear way to verify your payment history. While paying by cash or money order may seem convenient, it will not always be an acceptable form of verification by underwriting.
Also, you have pay to a management company or an apartment complex, these are both considered institutional sources where we can obtain your verification of rent (VOR) from.
5. Don’t be afraid to ask questions!
As an approved USDA mortgage lender, we are your best resource for details about what actions can help or hinder your loan approval.
If you have any questions or concerns about a financial event you are considering during the loan process, please let us know prior to taking action.
We are here to help you navigate the USDA mortgage application process and make it as smooth as possible. In fact, we have created several free USDA resources to help you along the way. Plus, you can always call or email to discuss your scenario and let us show you the Metroplex difference!
800-806-9836 Ext. 280
P.S. -You can download our “USDA Condo Approval Checklist” by CLICKING HERE
How do flood zone maps affect USDA mortgage eligibility? Can you buy a home that is in a flood zone with a USDA mortgage? These are great questions, because the topic of flood zones and USDA eligibility can create confusion during the process!
We commonly deal with situations where USDA eligible properties are located within a FEMA flood zone. In today’s video, I will explain how flood zone maps affect USDA mortgage eligibility, if additional structures require flood insurance, and the required flood insurance coverage amounts.
Now, if you have not yet done so, please download our FREE USDA Blueprint for Success. This free guide is designed to walk you through the USDA process step-by-step and is a great educational tool for the real estate community.
How do Flood Zone Maps affect USDA Mortgage Eligibility?
FEMA Flood Maps
Flood zone maps are maintained by FEMA, used to show how likely it is for an area to flood. They are also available to help communities understand how to reduce their risk. FEMA states the following regarding flood maps:
“Flood maps help mortgage lenders determine insurance requirements and help communities develop strategies for reducing their risk. The mapping process helps you and your community understand your flood risk and make more informed decisions about how to reduce or manage your risk.”
USDA flood zone requirements for properties located in a Special Flood Hazard Area (SFHA) are different for existing dwellings versus new or proposed construction properties.
Today, I will only be discussing USDA flood zone requirements for existing dwellings. If you do have any USDA new construction questions, please call my team so we can assist!
Once it has been determined that property is located in a Special Flood Hazard Area (“SFHA”) in accordance with the National Flood Insurance Reform Act of 1994, USDA guidelines state the following:
“Existing dwellings located in flood zones are eligible under the SFHGLP if flood insurance, through FEMA’s National Flood Insurance Program (NFIP), is available for the community and flood insurance whether NFIP, “write your own,” or private flood insurance, as approved by the lender, is purchased by the borrower.”
Additionally, guidelines require that:
“Insurance must be obtained as a condition of closing and maintained for the life of the loan for existing residential structures when any portion of the structure is determined to be located in a SFHA, including decks and carports, etc.”
Do additional structures on the property also require flood insurance?
There is good news for this question! The Homeowner Flood Insurance Affordability Act (HFIAA) of 2014 states:
“flood insurance is not required for any additional structures that are located on the property but are detached from the primary residential structure and do not serve as a residence, such as sheds, garages, or other ancillary structures.”
USDA Flood Insurance Coverage Requirements
USDA Minimum Required Flood Insurance Coverage Amount
USDA Rural Development guidelines require the applicant to obtain flood insurance when the property is located in a Special Flood Hazard Area (“SFHA”) as determined by the FEMA flood zone maps. USDA eligibility guidelines require minimum flood insurance coverage as follows:
“Flood insurance must cover the lesser of the outstanding principal balance of the loan or the maximum amount of coverage allowed under FEMA’s National Flood Insurance Program (NFIP).”
USDA Maximum Flood Insurance Deductible
USDA guidelines also provide for the following maximum flood insurance deductible amounts:
“Unless a higher amount is allowed by state or federal law (which includes FEMA policies), the maximum deductible clause for a flood insurance policy should not exceed the greater of $1,000, or one percent of the face amount of the policy, or the minimum deductible offered by the borrower’s chosen insurance carrier. Existing dwellings for the SFHGLP are eligible if flood insurance is available.”
(SFHGLP stands for the Single Family Housing Guaranteed Loan Program.)
USDA Eligibility – Flood Insurance Summary
Today’s topic is not an exhaustive list of USDA Rural Development flood zone requirements. However, it does help explain how the FEMA flood zone maps affect USDA eligibility under the Rural Development Single Family Housing Guaranteed Program.
If you are trying to qualify for a USDA mortgage with a property in a flood zone do not let the details overwhelm you! It is important to remember the basics and understand that that USDA eligibility for properties requiring flood insurance has greatly improved from previous years.
Additionally, understand that while it is possible to qualify for a USDA mortgage with a property located in a flood zone:
- certain flood insurance coverage requirements will apply, and
- certain flood insurance deductibles will be required.
What are the benefits of working with a USDA approved lender?
The USDA loan program can be extremely powerful when you are working with a USDA approved lender that understands the program and has the experience to maximize its potential.
As a USDA approved lender, we are here to help you understand how FEMA flood zone maps affect USDA eligibility. This includes explaining USDA flood insurance requirements and walking you through the USDA eligibility process step-by-step.
Just call or email to discuss your scenario and let us show you the “Metroplex” difference.
800-806-9836 Ext. 280
I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!
P.S. – You can download our “USDA Blueprint for Success” by CLICKING HERE.
What are three reasons why a home seller should accept your USDA loan offer in today’s market?
We are constantly hearing how tough it can be just to get an offer accepted! Unfortunately, it is true that many sellers are only wanting to accept offers with conventional financing.
However, that can be very short-sighted from a home seller’s standpoint, because there are many extremely qualified USDA loan buyers who are getting passed by simply because they are not working with a conventional loan.
In today’s video I will share three reasons why a home seller should accept your USDA loan offer and not be scared of the USDA program.
Before we get started, don’t forget to take advantage and download our USDA Blueprint for Success with the link below. This free guide is designed to walk you through the USDA loan process step-by-step and is a great tool for both homebuyers and Realtors alike.
What are three reasons why a seller should accept your USDA loan offer?
As a starting point, I feel that it is important to help educate home sellers on the benefits of a USDA loan, how it can expand their potential pool of buyers, and how working directly with a USDA approved lender can help to make for a successful transaction.
Remember, just because the offer to purchase states that they are getting a conventional loan, does not guarantee it will be a successful closing!
- There is NO Maximum Sales Price for USDA loans!
Unlike FHA or Conventional loans which have maximum loan limits per country, the USDA program does not have a maximum loan amount. USDA loans base the sales price a buyer is eligible for on the borrower’s ability to qualify.
Thus, if a home seller eliminates those offers with USDA loans, they are missing out on potential offers which could be even more competitive then only considering sales contracts with conventional loans.
USDA loans have come a long way since the guidelines were overhauled back on 12/1/2014 and because the USDA loan program has been greatly modernized, it should be viewed as a reliable loan program for sellers to choose from especially when working with a USDA Approved Lender such as Metroplex Mortgage Services.
- There are NO closing costs a seller has to pay on a USDA loan!
Many Realtors and sellers continue to think that there are additional costs a seller must pay if they accept a sales contract with USDA financing. This is commonly referred to as a “non-allowable” cost.
However, that is simply not true! A seller is not required to pay any of the buyer’s closing costs, pre-paid items, or inspections unless they agree to it within the sales contract. Just to be clear, the seller is not required to pay any additional costs for USDA financing.
I know how important it is to write a clean offer without requiring extra costs from the home seller, so please make sure sellers understand that USDA loans do not require any additional costs from them!
- In-ground swimming pools are allowed with a USDA home loan!
Under prior guidelines, there were restrictions for properties that had in-ground swimming pools. Even though this guideline was updated way back on December 1, 2014, many Realtors, sellers, and even some lenders still believe that an in-ground swimming pool cause trouble for USDA financing.
However, remember that this archaic guideline is thankfully a thing of the past. USDA loans do allow in-ground swimming pools!
Importance of working with a USDA Approved Lender
As an approved USDA lender, Metroplex Mortgage Services known for our specific USDA loan expertise and because of our dedicated in-house underwriting, this provides a customized USDA loan solution from initial qualification to closing. This type of team approach allows one point of contact for Realtors and buyers alike throughout the loan cycle.
Just call or email to discuss your scenario and let us show you the “Metroplex” difference!
(800) 806-9836 Ext. 280
P.S. – You can download our “USDA Blueprint for Success” by CLICKING HERE
When first-time home buyers are comparing a USDA home loan vs. the FHA loan program, it is important to understand the key benefits and differences of each. In today’s video I will compare the benefits of a USDA Home Loan vs. an FHA loan so you can see the differences side by side.
Now, before we get started, don’t forget to take advantage and download our USDA Blueprint for Success with the link below. This free guide is designed to walk you through the USDA home loan process step-by-step and is a great educational resource for first-time homebuyers.
How do the benefits of a USDA home loan compare to FHA loans for first-time buyers?
As a starting point, although USDA and FHA loans are both available first-time homebuyer programs, there are distinct differences between the two loan options.
Today we will compare and contrast USDA Home Loans vs. FHA loans along with discussing key benefits such as down payment requirements, closing costs, and the borrowing costs associated with each program.
Is a Down Payment Required?
One of the most well known benefits of a USDA loan is that there is no down payment required!
However, unlike USDA loans which offer 100% financing, an FHA loan requires a minimum down payment of 3.5% of the sales price. For example, on a sales price of $150,000 ,your minimum down payment on an FHA loan would be $5,250 compared to no down payment for a USDA loan.
How do Closing Costs compare?
Another important benefit of a USDA loan is that it allows you the flexibility to finance closing costs into the loan. This can happen in situations where the appraised value is higher than the contract sales price. Obviously, the ability to minimize out-of-pocket costs can be an extremely attractive feature to first-time homebuyers.
In contrast, FHA loans do not permit the financing of those out-of-pocket closing costs.
Remember that no down payment does not mean the same thing as no money-out-of pocket and closing costs will apply on both FHA or USDA loans. However, depending on your appraised value, a USDA home loan has the ability to finance those out-of-pocket costs into your loan which can be a another key benefit for first-time homebuyers.
How is Mortgage Insurance Calculated?
While a USDA loan does not technically have mortgage insurance, it still has what is called an annual fee that is calculated at .35% of the loan amount. Further, although this fee is for the life of the loan term, because it is over over 2X lower than the FHA Mortgage Insurance Premium (“MIP”) this results in significantly lower borrowing costs.
Additionally, a USDA home loan has a one-time financed Guarantee Fee of 1%, which is also lower than the 1.75% FHA Upfront Mortgage Insurance Premium (UFMIP).
Additionally, it requires a monthly mortgage insurance premium (MIP) of .85% of your loan amount which last for the entire mortgage term when using less than 10% for down payment.
In summary, because many banks and lenders do not specialize in USDA loans, we commonly see first-time homebuyers only offered FHA or Conventional programs.
As you can see, it’s important for you to understand the differences and also to know that we are here to help walk you through the process.
On top of being a top ranked USDA Approved Lender, my team is known for our overall government loan experience and our specific USDA loan expertise.
Just call or email to discuss your scenario and let us show you the “Metroplex” difference.
800-806-9836 Ext. 280
As always, I want everyone to make it a great day, and I look forward to seeing you right here for the next tip of the week!
P.S. – You can download the USDA Blueprint for Success HERE
From all of us at Metroplex we would like to wish you and your family a lovely Fourth of July!
We hope you spend the day relaxing, appreciating our wonderful country, and lighting up your BBQ to grill the day away.
Barbecue and the 4th of July go hand in hand. Not only is it the most popular day of the year to grill, but approximately 150 million hot dogs and 700 million pounds of chicken are consumed today.
Here are 3 more surprising BBQ facts:
- BBQing is not just for the summer. In fact, 70% of Americans own a grill or smoker.
- The longest BBQ lasted 80 hours and was a benefit for the Juvenile Diabetes Research Foundation. On that day, Jan Greeff cooked 1,000 hot dogs and 200 pieces of corn.
- There are actually 4 different types of pork ribs. Spare ribs, St. Louis-style ribs, country-style ribs, and baby-back ribs.
Lastly, we should all honor our Declaration of Independence on this special day and keep its important first sentence in mind…
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, liberty and the pursuit of Happiness.”
Do USDA Loans have acreage limits?
Acreage questions and USDA loans seem to go hand in hand. This also happens to be one of the most common questions that we receive. In today’s video I will explain the details and help separate fact from fiction.
Also, if you have not yet done so, feel free to download our newest “USDA Blueprint” with the link below. This free guide is designed to help walk you through the USDA process step-by-step and is a great educational resource for both homebuyers and Realtors alike.
Do USDA Loans have an acreage limit?
As a starting point, remember the title of the program is the USDA Single Family Housing Guaranteed Loan Program and because this is for single family housing, it is not designed to be a loan solution for working farms or income producing properties.
Now, to answer our question, USDA Rural Home Loans do NOT have an acreage limit!
This is a great improvement when compared to previous USDA guidelines which had such limitations! With this added flexibility, it now provides the potential to increase both the amount of acreage you can finance with a USDA loan along with available property types.
However, when working with higher acreage properties please keep in mind the following USDA requirements:
- The site must be typical for the area;
- The site must not include income-producing land or buildings to be used principally for income-producing purposes;
- Vacant land without eligible residential improvements; or
- Property used primarily for agriculture, farming or commercial enterprise.
It is also important to remember that when determining their market value, appraisers will look to compare other similar sized acreage properties that have recently closed.
While it is true that you will not be able to purchase a stand-along parcel of vacant land, remember that you are able to purchase land in conjunction with a single-family, manufactured, or modular home under the USDA Single-Close Construction to Permanent Loan.
In fact, we have recently seen an increase in USDA Manufactured Home and Land financing package requests.
Remember, that while manufactured homes are not generally not permitted, USDA loans can be used for new manufactured homes under the Single-Close Construction to Permanent Feature. This is a case where funds from the USDA loan may be used to purchase an eligible parcel of land in conjunction with the home purchase.
We have experience working with USDA Loans for Manufactured Homes so please contact my team today so we can walk you through the qualifying steps.
Unique properties can require additional review upfront, so if you have any USDA loan acreage questions, contact my team so we can start to review and help determine how many acres you can buy with a USDA loan.
In summary, do not assume that a property may or may not be eligible for a USDA just based on its acreage. Comparable sales in the area will help to justify if the site value is typical for the area.
I founded Metroplex Mortgage Services way back in 2001 and in addition to being ranked among the top USDA Approved Lenders, my team is known for our overall government loan expertise and helping walk homebuyers through the mortgage qualifying maze.
If you need help, that is what we are here for, just call or email to discuss your scenario and let us show you the “Metroplex” difference.
(800)806-9836 Ext. 280
As always, I want everyone to make it a great day and I look forward to seeing you right here for the next tip of the week!
Don’t forget to download our USDA blueprint for success with this link below: