USDA
Pros and Cons of USDA Loans
The USDA Rural Development Loan is a loan program that was created to help low to moderate-income homebuyers purchase a home in rural areas. However,
March 10, 2022
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Contents
- What is the USDA Rural Development Loan?
- Minimum Credit Score for USDA Loans
- Down Payment Requirements for Rural Development Loans
- Closing Costs for USDA Rural Development Loan
- USDA Income Limits in Louisiana
- What Type of Home Qualify for USDA Rural Development?
- Benefits of USDA Loans
- Cons of Louisiana USDA Loans
- How Long It Takes to Get Approved for Rural Development Loan
- How to Apply for a USDA Loan
The USDA Rural Development Loan in Louisiana allows home buyers to purchase a home with no down payment required. If you are wanting to understand more about USDA Rural Development loans, you’re in the perfect place. Bayou Mortgage works with multiple lenders many of whom have no overlays. As a broker we also offer very low wholesale rates for our USDA Loan clients.
What is the Rural Development Loan?
The Rural Development loan is a 100% financed home loan program insured by the United States Department of Agriculture or USDA for short. The goal of the USDA Rural Development Loan is to build home ownership in less population dense communities. However don’t let the name fool you. USDA loans are great programs for anyone looking to purchase a home in suburban and more rural areas. Basically anything typically located outside of major city limits will qualify.
What are the USDA Rural Development Loan Requirements?
The Rural Development USDA Loan has three basic qualification requirements:
What is the minimum credit score for a USDA Rural Development loan in Louisiana?
The USDA does not have any published restrictions on credit scores but most lenders set a score requirement for each borrower. In order to obtain an automated approval for USDA Loans you must have a credit score of at least a 640. However if your score is lower than this it doesn’t mean you can’t qualify. While most lender will stick to this 640 requirement we have multiple lenders that will allow us to help clients with credit scores as low as 580 using a manual underwrite.
Is a down payment required with a Rural Development Home loan?
One of the best things about the USDA loan is that it is 100% financing. This means that there is no down payment required when using your USDA Loan. While the loan does have a $0 down payment requirement, it is important to remember that there are still closing costs. However below I will show you how to get the seller to cover everything but your appraisal.
What are the closing costs for a USDA Loan in Louisiana?
Closing costs are charges and fees that you incur when purchasing a home. Almost all of these charges are for 3rd party services required throughout the transaction. It also includes things like 1 year of your taxes and home insurance (and flood) charged upfront to get your escrow account started. The typical costs will vary depending on location, purchase price, and overall credit profile of each borrower. In Louisiana you should typically expect between $5000-$8000 in total closing costs. While that is probably a big scary number the good news is that there are two different ways to cover these costs.
Seller Paid Closing Costs
Rural Development allows the seller to cover up to 6% of the purchase price in closing costs. This means if you purchased a $200,000 home and received the full 6% the seller could contribute up to $12,000 towards the buyers costs. (Which would be well above what was needed to cover 100% of the costs). The even better news is that it’s fairly common to have the seller contribute between $5,000 to $8,000.
Financed Closing Costs
USDA Loans are unique in that they are the only loan program that allows you to finance the closing costs into the loan IF the home appraises for more than you purchased it for.
For Example:
Home Price= $200,000
Appraised Value = $205,000
Cost You Can Roll In = $5,000
What Are The USDA Income Limits in Louisiana?
These loans have an income limit that restricts the amount a household can earn and still qualify or the program. Since it’s a household income limit this means that we have to use the income from any person in the home is working. The lender will typically require tax returns and other income documents from all adult members in the home. The income limits are as follows below:
1-4 Person Household
$103,500
5+ Person Household
$136600,
What Types of Homes Qualify for USDA Rural Development?
The USDA is fairly flexible on the different types of homes you can purchase using the program. These home types include:
- New Construction Homes
- Preexisting Homes
- Townhomes
- Condos
- Manufactured Homes
- Modular Homes
Homes that you may have difficulty purchasing would be Farms, Large Tract Acreage, Foreclosures and Short Sales. For foreclosures and short sales the biggest determining factor will be property condition. If they are move in ready it should be ok. However if any of these homes need work they likely won’t qualify to purchase using this program.
What are the benefits of a Louisiana USDA Loan?
1. No Down Payment
2. Low Interest Rates
3. Low Monthly Mortgage Insurance
4. Flexible Credit Requirements
5. Ability to Roll Closing Costs Into The Loan
6. Most of Louisiana Qualifies
What are the cons of a Louisiana USDA Loan?
1. Primary residence only
2. Have to buy in areas considered rural
3. Income limits restrict who can qualify
4. Low debt-to-income ratio requirements
How long does it take to get approved for a USDA Loan?
It typically takes between 30 and 45 days to get approved for a USDA Rural Development loan. Rural Development loans take slightly longer than other loan programs because they must be reviewed by the USDA before final approval can be issued. Louisiana is also an extremely popular USDA Loan state, so turn times range between a few days and up to 3 weeks to get this reviewed.
How to Apply for a Rural Development (USDA) Loan?
The easiest way to get started with a USDA Rural Development Loan is to take our quick 60 second pre-qualification quiz. There is no social or credit check required. Once you complete this form one of our licensed USDA loan experts will reach out to you to discuss your qualification.
