If you are looking to purchase a house with a USDA mortgage, you must get a pre-approval before you begin to shop for a house. This ensures you know how much house you can afford and whether or not you qualify for USDA financing.
Mortgage loans provided by the USDA works a bit different from other financing programs. The USDA started their program to help low- to middle-income families that do not qualify for other kinds of mortgage. Read on to understand how you can get pre-approved for a USDA loan:
Proving your Eligibility for the Loan
To get a USDA pre-approval, you must be eligible for the program. To determine your eligibility, the USDA requires lenders to check your total household income. This means they look at the entire income of the family instead of just the borrower and co-borrower. The USDA understands that families usually live together and everyone helps out in paying their bills.
You can prove your eligibility by giving a proof of income of all members of your family. It should include teenagers who work and seniors who receive a fixed income like social security. Take advantage of the income eligibility tool that you can find at the USDA website to know your eligibility in advance. Also, get more related info from USDAloan.
Getting a Pre-Approval
If you want to get pre-approved prepare the USDA loan application. On this application, you must disclose your personal information, assets, debts, and income. Also, you will give details on your employment and how much you make every month.
The USDA-backed lender will run the information you submit through their system to ensure you qualify for the program. After determining your qualification, they will ask you to submit proofs of the information you give. To prove your income, you should be ready to submit pay stubs, tax returns with all schedules and W2s. Also, you can prove your assets by providing at least the last two month of your bank statements. Award letters for disability income or social security can be proof of miscellaneous income.
Such information will be used by the lender to decide if you qualify for a USDA loan. To determine if you are a good candidate, you should be able to meet their requirements such having at least 640 credit score, maximum 29% housing ratio, stable income, maximum 4% total debt ratio, stable income, and others.
After the underwriter decides your qualification, they will give you a pre-approval letter. You can show that letter to the home seller so they will know the amount of loan you can qualify to get from the USDA and the conditions you should satisfy to close on the loan.
Since the USDA loan does not require you to give a down payment, the loan amount you qualify for is also the home’s price or below. With this, you can prevent yourself from overspending and buy a house within your means. Keep in mind though that USDA loans are only for rural homes. To be sure the house you wish to purchase is within the department’s boundaries, use their map.