USDA home loans offer a number of benefits, which make them a popular option among many of the home buyers we work with.
They provide the option for 100% financing, flexible qualification standards, and competitive interest rates, among other advantages. As a result, they are a financing option that gives some who might not meet the qualification standards for other mortgage types the opportunity to purchase a home.
Curious about the USDA home loan process? Here’s a brief overview to help you understand what to expect if you think this might be the right mortgage option for you.
Generally speaking, the USDA home loan process follows the same basic procedure as other types of home loans. (You can find a general overview of the mortgage process here, for reference.)
Here’s what to expect from a USDA-specific mortgage process:
First, you’ll need to find a lender or broker that you want to work with. Once that’s done, work with them to get prequalified. This will involve a review of how much you’re planning to borrow to purchase a home, your income and assets, your monthly debts, and your credit.
Once your financial situation has been reviewed, your lender will provide an estimate of how much you can afford to spend and will inform you of whether or not you will be able to close on a USDA loan based on the information you provided.
If your prequalification looks promising, you can move on to the step of being preapproved for a USDA loan. This is a similar process, but instead of using estimates for your financial information, you’ll provide exact figures for your lender to work from based on tax paperwork, pay stubs, bank statements, and other financial documents.
Getting preapproved does not mean you are guaranteed a USDA loan, but it does indicate that you are strongly qualified. Because it can indicate to sellers and realtors that you are a serious prospective buyer, it may give you an edge when it comes to making offers on homes you’re interested in.
Once you are preapproved for a USDA home loan, you’ll need to find a property that meets USDA home loan criteria.
USDA loans are available to homeowners purchasing properties in rural areas. Some of these rural areas aren’t really rural, though—so do some investigating into the area before assuming you won’t be eligible for a USDA loan.
This step is one you’ll encounter no matter what type of loan you’re planning to use to finance your home purchase. You’ll work with the buyers, likely through your realtor and lender, to coordinate a purchase agreement including details about the price you’ll pay for the property, who will be covering closing costs, etc.
There may be some back and forth to decide on terms. Once they’re settled and the purchase agreement is signed, a USDA loan appraisal will be ordered to ensure that the appropriate standards are met before you move forward.
After the agreement has been reached and the home has been appraised, you’re officially under contract. Now, it’s time to wait.
Your lender and an underwriter will work together to review your file again to ensure, once and for all, that you meet all the qualification standards and that everything is in proper order to move forward with finalizing the sale and closing.
Once your loan file has been carefully reviewed and both the lender and the USDA have approved it, you’ll receive word that you’re “clear to close.” This means you can schedule your official closing and finally become the official owner of your new home!
While the exact time frame for moving through the USDA loan process will vary depending on your specific situation, in most cases it takes anywhere from 30 to 60 days to complete.
Though the process laid out above doesn’t involve that many steps, it can be time-consuming to complete – and a bit unpredictable at times. So although you’ll likely be anxious to get into your new home, it’s important to be prepared for delays and possible setbacks as you approach the final clear to close.
At Maple Tree Funding, we recognize that a home is one of the largest purchases most people will ever make in their lives. We are grateful to be a part of the home buying process for so many throughout New York State.
We also recognize that the home purchase process can be daunting and overwhelming when you’re approaching it for the first time (or for the second or third for that matter).
That’s why we are here, to guide you through the process of obtaining a home loan every step of the way.
Interested in learning more about USDA home loans? Check out our Guide to USDA Home Loans for more details and helpful articles about financing your home purchase through the USDA.
Ready to take the first step towards purchasing a home? Start the New York mortgage pre-approval process today!