2022 USDA Requirements ZERO Money Down – Hear Directly From USDA!

USDA Loans may be the best kept secret in America. In this video I interview a USDA official to understand exactly why this zero down payment mortgage is so great! You can use the 2022 USDA loan to buy land and build, new contruction, and resale homes.

Hello this is shahidah hill getting you over the hill to home ownership and helping you confidently buy your first home i’m really excited to have ed peace from usda with me today and he’s going to tell you all about the usda program and how it can help you become a home owner ed thank you so much for joining me i’m going to allow you to introduce yourself okay

Good morning thank you shahida for having me and it’s exciting uh you know we try to get the word out about the guaranteed home program through usda and uh so my name is ed peace i’m a loan and finance analyst on the national office staff now i spent uh 30 plus years in the only staff in georgia with usda and most recently was the program director for the for all

The housing programs out of our state office in athens before moving over to the national office so got 32 33 years in the mortgage industry with with us all with usda so okay great thank you for having me thank you so much and we have a few usda videos on the site already so there’s going to be a new usda video and i hope you enjoy it so we have seven questions

And we’re gonna get right into it so ed what is the advantage of a usda loan for home buyers yes so really the biggest advantage is no down payment um so we finance a hundred percent of the cost of of the purchase of a house and the closing costs we can roll those into the loan as well you know up to the appraised value so that’s usually the biggest hurdle a lot

Of people have is getting over to get over is the fact of having a down payment so there is no down payment with usda loan okay and talk about that a little bit more that rolling the closing costs into the loan because a lot of people don’t are not aware that they can do that right so say the house appraises for easy numbers for a hundred thousand dollars and the

Purchase price is ninety five thousand dollars so you have a between the ninety five thousand and a hundred thousand you have five thousand dollars worth of closing costs that you can roll into the loan so that you don’t have to pay it out of pocket you know and write a check at the long closing it’s very convenient and it saves a lot of folks their their pocket

Money you know very very much so especially in these times people are trying to hold on to as much money as possible in this economy so what are the qualifications so we know it’s zero percent down um what do i need to qualify for usda loan great question so everybody we finance is written into the law that usda helps those that are of moderate income and below

And moderate is defined as 115 of the median income and median income means that there’s a line drawn right between all wage earners in a particular area for our for our instance it’s uh counties so there’s as many earning above the median income as there are below the median income so the definition is 115 of median income so there are areas of the atlantic uh

There are counties in the atlanta area that still have some rural areas in them so um you know the the income limits are fairly high there so okay good so anywhere around the united states you have maybe us and every state in the united states have a usda area yes yes it does matter of fact there’s probably 95 of the land mass in the united states that is a rural

Area okay that’s very good to know so and let’s go back and we missed this at the very beginning a usda covers the rural portion so in order for me to get a usda mortgage it has to be rural so how do i know if the area that i want or i’m thinking about buying in is rural that’s a great question so we have on our eligibility website a tool to use that’ll show you

You can either plug in an address if you’re thinking about a particular house and it will tell you and show you whether it’s in the rural area or not um and or you can just zoom in on an area on that map and it will show you delineated out what is urban and what is rural so if you’re shopping for a house and you want to use usda you can kind of zoom in on the map

And see the areas that you need to be shopping okay and that’s a very good point like statistic that i wasn’t aware of 95 is considered rural who knew right so so you know the definition we can go into towns um up to 35 000 so you know obviously all the big cities in in georgia would be you know atlanta macon augusta um savannah those types of areas obviously have

Urban areas around you know they are urban so so you can zoom in on those areas to see what what um areas of those particular towns are eligible okay and we will link all of these websites in the description of this video okay so we talked about um that you could roll some of the closing costs into your loan if you’re not able to do that is there any down payment

Assistance that could help with closing costs well we don’t specifically have down payment assistance um but there’s no prohibition against you know maybe a silent second mortgage behind um that might help with closing costs just as long as the lender ensures that they have a first lien you know at closing so okay we’ll guarantee that first lien only all right and i

Know i have to be moderate income what about credit um what’s my credit score need to be yeah so a few years ago um it hasn’t been all that long ago that we basically did away with minimum credit scores for usda’s purposes on the guaranteed program so so really it’s up to the lender to prudently underwrite and use their overlays maybe they have minimum credit scores

Of their own or maybe the secondary market that they’re using has has minimum credit score so basically we rely on them to underwrite that loan from the credit standpoint okay so no minimum credit score that you require but the lender may have something that they require for usd uh modern income what about debt to income ratio yes so typically um the standard 2941

Is um is generally the the ratios in other words the front end what we call the front end ratio being the 29 of of their income house payment cannot exceed house payment taxes and insurance can’t exceed 29 percent of the income okay 41 of their income is the limit on including that piti that house payment taxes and insurance plus any other monthly debts that

They have generally can’t exceed 41 now i say generally because we have an automated underwriting system that takes compensating factors into account so if someone has um really a you know is really strong in one area like been on the job for 20 years or something like that you know or they have higher credit scores um then then the automated system may allow

A little bit higher ratios or for house payments compared to the income to qualify so 2941 is kind of the baseline but it can be exceeded with certain compensating factors okay very good to know all right so question number four so this is there’s it’s really difficult right now in this economy to find a home like inventory is so super low and i know you have

I know you can get a resale property with a usda loan but let’s talk about the new construction options that you have so if somebody finds some land in one of these rural areas and they want to build a home how can they go about doing that yes so um we have we have a single closed construction uh construction to permanent loan program or actually feature to our

Program to our loan program that um that allows them to do just that um so used to the old way of getting a house built was uh an individual or a couple or family had to find a construction loan and then you know the house was built and then they pretty much after the house was built have to find permanent financing you know to refinance that construction loan

Well with usda we can do it all in one loan closing and the um the construction loan is closed then all the construction process is done the house is built the inspections are made obviously the appraisal’s done and at the end of that process when when they’re ready to move into it the lender basically just converts that loan to a permanent loan and um and they

Start making payments so they don’t have to have you know closing costs associated with two different loans it’s just that one loan the the beauty about this particular program is not only is it a single closed construction permanent but um believe it or not the interest that approves on the loan after that construction portion is closed that can be rolled into

The loan up front um so that they don’t have to make payments um interest payments while the house is being built and trying to meet rent payments as well and shahida believe it or not they can even go as far we can allow the the principal interest taxes and the insurance payment the whole house payment to start being being made right after that construction um

Portion is closed um and and that part can even be rolled into the loan so so we have a couple of different options there i know it’s kind of down in the weeds a little bit but okay both of those the interest only and the full house payment can actually be rolled into our loan into the lender’s loan and we will guarantee that um in order to keep those payments

From being so higher or being doubled for them to have to make a rent payment and the and the new house payment while the house is being built and again at the end of the process they just they just start making those house payments after it’s converted to a premium okay that sounds excellent so i could get uh find a builder find the land finance it all in one um

Transaction i don’t have to make any payments i’m still like renting living in my apartment or living in a house that i’m renting this house is being built and so i don’t start making payments until the whole thing is done and are you saying two i can roll some of those payments like the first few payments into my loan yes the the payments will actually be made

But that’ll come out of loan proceeds if the house appraises for enough and generally they have been so okay that’s very good to know so i know it’s a little bit overwhelming for a first time home buyers say okay i’m gonna get the land bought the house what do you recommend for them to do so they can get some help with this process yeah so it is a um it can be a

Complicated process um we recommend that they hook up with a realtor that is able to hold their hand during the process i know not all realtors are involved in construction uh loans and construction processes but but the realtor can really hold their hand and know the questions to ask and seek the answers on their behalf you know with that builder and so um so the

Realtors on this single closed construction feature the realtor can actually if you know if there’s a small commission on the new construction um they can actually get paid at the closing of the construction portion right up front so well that that’s also good to know so definitely fine if you’re interested in doing this usda single closed construction you need to

Find a realtor in that area who’s familiar with the land the zoning all of those kinds of things that can walk you through this because this again could be a huge opportunity for you if you cannot find a resale property and i’m so happy that you were able to share that now another question i always get one question number five is can you can you buy a manufactured

Home and that’s the isn’t that the old word for the new word for mobile home mobile homes yes manufactured home um can i use buy one of those with a usda loan actually yes um if it’s a brand new uh unit and has never been sold and is placed on a permanent in-ground concrete foundation then yes they can be financed through the usda guaranteed program um early on

I should have mentioned that we have a guarantee program which is the one we’re talking about today yes the direct program you know is a little bit different they are made by our offices scattered across the nation and georgia has about 12 or 13 offices and those are a little bit different they’re different income levels they’re lower income levels there’s a little

Bit more restrictions on manufactured homes on vote on that program than there is on the guaranteed program so so yes as long as it’s a new manufactured home and placed on a permanent in-ground concrete foundation we can finance them finance those okay in some states some states they’re actually running a pilot in 22 different states georgia is not one of them by

The way where they’re where they’re um financing existing manufactured homes i think if as long as they’re built after 2006 january 2006 but uh again georgia’s not one of those but but they are thinking about doing that throughout the nation but not quite haven’t gotten okay so again so check for your state your usda area to see if this is something that they’re

Piloting if you’re interested in a manufactured home and i do have a video um last year i interviewed another usda representative on youth on the direct program so if you’re under if you’re a lower income then that might be an option for you so you can watch that video after this video all right so i think we answered the question are you able to roll payments

Into the loan let’s talk about this how can we find usda lenders so because not all lenders do usda so how can um people find a usda lender yes um shahid i can send you the link where we actually have them listed by state by all usda approved lenders and uh you can include that in the link as well that way folks can kind of shop around not only closing costs but

Interest rates as well good to know and is there another list for the people for the lenders that do the new construction the single um single closed new construction there sure is and i can send you that link as well okay so we’ll have both of those lists in the description of this video was there anything else you wanted to mention well um the difference

Between the direct programs and the in the uh guarantee program uh the direct program like i said is made by usda office themselves whereas a guaranteed loan is made by approved lenders and then so the direct loan is is for lower income individuals and households and that actually those actually can be subsidized payments where payments are based on your income

So payments can actually be lowered the guaranteed loan it does not have subsidy and so a lot of times subsidy is great but the direct program keeps up with the amount of subsidy that’s been paid on behalf of a borrower and at the end of the loan whether it’s paid off naturally for 33 years or if they refinance it out of the program there’s a part of that subsidy

That’s due back to the government to the taxpayers and and as a shared appreciation so the more the more that the property increases in value the greater percentage of that subsidy is due back is included in the payoff so contrast that to the guaranteed program it has no subsidy so so every borrower makes the full non-subsidized payment but the good thing is

There’s no subsidy recapture at the end of the loan okay all right so we got some really really good information so number one we know where you’re gonna look at the link you’re gonna see where the usda areas are in your air in your state you’re also gonna know what lenders specialize in the usda program and what lenders specialize in the construction usda program

What is something that you want you know america right to know about usda because you were we were talking earlier and said people really don’t know we think about usda we think about food and meat and that sort of thing what do you want you know america to know about the usda mortgage program yeah so you know like you just mentioned the everybody when when they

Think of usda think of meat inspections or farming and agriculture where we’re all of that but we also have the financial piece to it too as well and uh where we can finance houses in the rural areas um with no down payment my wife and i built our first house through the guaranteed program years and years ago in 1994 and just a few years after that we refinanced

It and so you know we’re we’re success story in ourselves um of course i didn’t approve that long i wasn’t able to prove my life but right but uh you know i had to go through special channels to get that done but yeah so it’s a it’s a not as well known as fha and so the payments i know that was one of the questions was you know since there’s no down payment people

Usually wind up borrowing more um with the usda but the way the fees are structured even though they’re borrowing more the payments a lot of times are lower than what they would be with any other program including fha or va so it’s a very affordable loan program for folks in the rural areas okay very very good to know and it can come at a better time i think

With people looking for what are my options like what can i do because they can’t afford rent right you know rent is going up um you know some people 30 or more and then a lot of the home prices are going up so people are looking for you know other options so i think it’s a great time for a lot of people to consider a usda loan thank you so thank you so much for

Joining me i really really appreciate you sharing this information and again we’ll have a lot of links in the comments and i love your name by the way peace you can find peace and tranquility right in um usda areas for the most part right that’s right thank you so much ed i appreciate it thank you

Transcribed from video
2022 USDA Requirements ZERO Money Down – Hear Directly From USDA! By Shaheedah Hill