Can You Pre-Qualify For USDA Loans in Pennsylvania?
What are the requirements for the USDA Loan program in Pennsylvania? So USDA has a few interesting requirements.
First of all, you’ll need to have at least a 580 credit score. Some mortgage lenders in Pennsylvania require a 620 credit score.
Your household income has to be under the county maximum. Like a lot of down payment assistance programs.
This is based on family size So 1 to 4 is one category and then 5 and above is a higher threshold for qualifying. ChurchFinancing.biz looked at the data and with the average family size in the USA in areas that qualify for UDA Loans, this is a standard spread.
What’s unique about this one is the home has to be within a designated area. So, Typically what that means is…
NOT within a metropolitan area. So within our area here aka USDA Loans in Pennsylvania territory. If you want a full list of USDA Loan Eligible Areas, Check out the Eligibility Map that the Government provides.
Our local cities around her don’t qualify. But, we only need to go 10 miles away to where there’s an open area where there’s Several homes that qualify.
USDA Loans in Pennsylvania and in any other state for that matter, stands for United States Department of Agriculture.
But it’s NOT a farm loan. Specifically, they don’t finance this program for farms. It has to be a Single Family home without a barn structure on the property.
USDA Loans : Does it also have some home price limitations?
The Threshold is a little bit lower than say an FHA loan for the loan limits. Ok, and how does this program differ from other Down payment programs?
So it’s different because it’s not really a down payment program but it allows financing up to a 100% of the purchase price.
And it’s interesting because you can actually use this program with 1 or 2 of the other programs.
If you need closing cost assistance But, what’s unique it’s a 100% Financing. So you don’t need a 2nd or a 3rd lien on the property.
Your interest rates are typically lower Than if you combine it with a down payment assistance programs.
And you don’t have to repay any down payment assistance It has a monthly factor It’s like mortgage insurance upfront It’s financed at a monthly component.
FHA vs USDA vs VA Loans in Pennsylvania
Much less than FHA. o if you can qualify for this program It’s better than FHA And As we mentioned, rates and payments Are typically lower on this program.
So USDA is really a great program. And on average How much does the home buyer have to come in with out-of-pocket?
So Again, we are financing the whole loan Purchase price up to 100% So the only thing remaining is then the closing costs .
Typically, plan on around 3% of the purchase price for funds to close. The question there then becomes, Well, Where does that come from?
Typically, we ask the seller to cover those costs.
And if we can get the seller to cover 3% then, the buyer may only need to come in with an earnest money deposit.
And they may even get most or all of that back. If the seller is covering all the fees. One unique feature about USDA Loans in PA Versus all other loans is that if the home appraises for more than the purchase price.The USDA loan, also known as the USDA Rural Housing Loan Program is a 30 year fixed rate mortgage that is created for low to moderate income home buyers. The house must be located in an USDA eligible area of Pennsylvania. The USDA mortgage loan does not require a down payment (100% financing plus the guarantee fee). The USDA home loan is a zero down mortgage program. Home buyers must meet the income limits for PA (see below). You can estimate the USDA loan amount and mortgage payment with the USDA calculator. The loan is "insured" by the United States Department of Agriculture. USDA Income Limits for Pennsylvania The income limits vary by the Pennsylvania and the metropolitan statistical area (MSA) and household size: The 2018 - 2019 Pennsylvania base USDA income limits are: 1-4 member household: $82,700 5-8 member household: $109,150 There are county exceptions for higher incomes. See USDA income limits Annual income includes all eligible (gross) income from all adult household members, not just parties to the mortgage. The household income may be adjusted downward due to: Care of Household Members with Disabilities Child Care Expenses Dependents Elderly Household Medical Expenses The USDA provides extensive information on income determination in Chapter 9 of the SFH Guaranteed Loan Program Technical Handbook USDA Loans and Credit Score and Credit History For manually underwritten loans, the USDA requires a 640 "middle" credit score, although, there are exceptions: Credit score less than 640 According to the USDA underwriting guidelines, underwriters (that's the approval person), must perform a cautious level of underwriting. A detailed review of all aspects of the applicant's credit history should be examined to establish the applicant's willingness to repay and ability to manage obligations as agreed. Unless there are extenuating circumstances documented in accordance with this Chapter 10, a credit score in this range is generally viewed as a strong indication that the applicant does not have an acceptable credit reputation. Little or no credit history: The lack of credit history on the credit report may be mitigated if the applicant can document a willingness to pay recurring debts through other acceptable means such as third party verifications or canceled checks. Due to impartiality issues, third party verifications from relatives of household members are not permissible. Lenders can develop a Non-Traditional Credit Report for applicants who do not have a credit score in accordance with Paragraph 10.6 of this Chapter Indicators of unacceptable credit The following indicators require documentation meeting the criteria of Section 10.8 to approve an applicant's loan request for manually underwritten loans: • Foreclosure within 3 years: Including pre-foreclosure activity, such as a pre-foreclosure sale or short sale in the previous 3 years (refer to Attachment 10-B for additional guidance); • Bankruptcy within 3 years: • Chapter 7 bankruptcy discharged in the previous 3 years; • An elapsed period of less than 3 years, but not less than 12 months, may be acceptable if the applicant meets the criteria of Section 10.8 of this Chapter. • Chapter 13 bankruptcy that has yet to complete repayment (repayment plan in progress) or has completed payment in the most recent 12 months. • Plans that are completed for 12 months or greater do not require a credit exception in accordance with Section 10.8; • Late mortgage payments if any mortgage trade line during the most recent 12 months shows 1 or more late payments of greater than 30 days. • Late rent payments paid 30 or more days late within the last 12 months. Read more about USDA credit requirements in Chapter 10 including bankruptcy, foreclosure and short sale acceptance USDA Qualifying Areas The home must be located in a USDA defined area. The USDA provides a lookup tool to determine whether the house is located in a USDA designated location. USDA area eligibility lookup The property must be predominately residential in character, use, and design. The home may be attached, detached or semi-detached and must meet the current minimum USDA property guidelines. Site Size There is no specified limitation to the acreage/size of the lot. A home with excessive acreage that represents a cost greater than a similar home with less acreage may not be acceptable. The appraiser must provide an addendum to the appraisal with an explanation to adjustments to comparable properties. Income Producing Buildings The property must not include buildings principally used for income-producing purposes. Barns, silos, commercial greenhouses, or livestock facilities used primarily for the production of agricultural, farming or commercial enterprise are ineligible. However, barns, silos, livestock facilities or greenhouses no longer in use for a commercial operation, which will be used for storage do not render the property ineligible. Outbuildings such as storage sheds and non-commercial workshops are permitted if they are not used primarily for an income producing agricultural, farming or commercial enterprise. A minimal income-producing activity, such as maintaining a garden that generates a small amount of additional income, does not violate this requirement. Home-based operations such as childcare, product sales, or craft production that do not require specific commercial real estate features are not restricted. Additional property eligibility can be found in Chapter 12 Property And Appraisal Requirements Chapter 12 also addresses potable and waste water systems, street access and road maintenance. PHFA and USDA The USDA loan program is accepted by the Pennsylvania Housing Finance Agency (PHFA) under the Keystone Government Loan Program. The benefit of the Keystone government loan is a lower interest rate and access to the Keystone Assistance Program (subject to PHFA guidelines). The maximum assistance loan is 4% of the sales price up to $6,000. There are no first time home buyer requirements with either the Keystone Government program or the Keystone Assistance program.
We can finance the closing costs Up to that appraised amount So, no other loan I know that we can actually finance the closing costs. on that type of loan.
What type of home buyer is this USDA program ideal for?
So certainly those that don’t have access to money for a down payment.
Anyone that wants to live that doesn’t have to live within a metropolitan area because, again, the house has to be in an area that is not in a high densely populated area in Pennsylvania.
It’s also suited well for people who have some credit issues and anybody that qualifies for this program would definitely be better served than going FHA so those type of people.
And besides the Area restrictions are their any other property restrictions?
So property restrictions are going to be similar to FHA They’ll do manufactured homes.
They’ll do homes with Casitas. So no real other restrictions. Just if it conforms to the FHA guides then it should qualify for USDA in Pennsylvania.
There’s a couple little quirky things That you don’t run into very often.
For example, you can’t actually have a barn on the property It definitely can’t be for agricultural purposes. It has to be for residential purposes check out our next blog section packed with facts on USDA Loans and Mortgage Lenders.
USDA Loan Income Limits in Pennsylvania:What's the process, when do you even start looking for a loan? Do you advise that people start before they even find a house or is this something where uh, once you kind of find the place you should go and get a long, kind of, pre-qualified? I always recommend that you start with the mortgage lender, before you start shopping and getting your heart set on something that may or may not be in your price range. I always usually recommend, if possible, stay with a local lender. That way there's no excuse of, "I didn't get the fax that you sent me. " You can actually go into the office. Just like Joel, he's right here in Greenwood. Bring the stack of papers to him and say, "You scan it, and you send it off. " But yeah, a mortgage lender is like the very first step. You can contact a realtor, I love it when people contact me first because I have preferred people that I've had experience with, working with lenders. Usually your realtor is going to have a list of lenders that they have worked transactions successfully with that they can provide you some guidance on. Yeah, and just to reiterate on that a little bit, there's nothing wrong with going and seeing Melissa and letting her know what you're looking for, so she can start kind of taking a look at the market and seeing what's going on, but you really want to come talk to a lender first because let's say you go and you find this house and it's $250,000 or $200,000 or whatever it may be and you love this house and it's everything you've ever wanted and you put in an offer and then you go talk to your lender afterward, there may be something that came up on your credit you weren't or your income didn't quite qualify you for that much. Then the next thing you know, all your hopes and dreams are gone, and you'll be upset. So get with your lender to make sure you're prepared before you go out and start you know, looking at houses. Well, even if you are going to be looking, maybe next year, or six months out, I would say go ahead and contact a lender because, like, Joel's great about looking at their credit and saying, "Hey, this is going to cause you some problems, these are some ways you can go ahead and, you know, step up that credit score by, you know, doing X, Y, and Z. " So it's always to go ahead, as early as you can and start working with your lender to get yourself ready. Yeah, it's never too to get in touch with me and let me know what you're looking for. So immediately? Mmhmm. Yep.
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