Getting approved for a USDA home loan can be an exciting prospect for potential homebuyers looking to purchase property in rural areas With generous terms like zero down payment and low interest rates, USDA loans provide an affordable path to homeownership that might otherwise seem out of reach
However, the process does involve some extra steps and requirements compared to conventional mortgages Many loan applicants wonder, “How long does it take to get approved for a USDA loan?” While timelines vary, you can expect the process to take 1-2 months from start to finish
In this comprehensive guide, we’ll walk through the USDA loan approval process step-by-step, so you know what to expect and how to set realistic expectations for timing.
Overview of the USDA Loan Approval Process
While specific requirements vary by lender, the USDA loan approval process generally follows these steps:
- Prequalification
- Formal loan application and preapproval
- Finding a USDA-eligible property
- Making an offer and getting an appraisal
- Underwriting review
- Final USDA approval
- Closing and funding the loan
Now let’s take a closer look at each stage.
Prequalification
Prequalification is an initial eligibility assessment by a USDA-approved lender. At this stage, the lender will evaluate factors like your income, debts, credit score, and loan amount needs to give you a rough idea of what you may qualify for.
Prequalification usually only takes about 30 minutes. The lender may also pull your credit report to verify the information you provide.
Getting prequalified in advance is important because it shows home sellers you are serious about buying if you make an offer.
Formal Application and Preapproval
The next step is to submit a full loan application for preapproval. Now the lender will closely scrutinize your financial profile, dig into documents, and determine precisely how much home you can afford.
To get preapproved, you’ll need to supply documents like:
- Tax returns and W-2s from the past 2 years
- Pay stubs covering the last 30 days
- Bank statements for the previous 2 months
- Driver’s license or other government-issued ID
This more rigorous vetting process typically takes anywhere from 3 days to 1 week. You’ll receive a preapproval letter stating the loan amount you qualify for.
Finding a USDA-Eligible Property
Armed with your preapproval letter, it’s time to start searching for homes. However, not just any property will do for a USDA loan. The home must be located in a designated rural area to meet eligibility standards.
The USDA has an online property eligibility tool where you can enter any address to see if it qualifies. Restricting your search area to eligible neighborhoods will help streamline the process.
Making an Offer and Getting an Appraisal
Once you find the perfect home in an eligible location, you can make an offer. After coming to agreement on price and terms with the seller, your lender will order an appraisal to ensure the home is worth what you offered.
USDA appraisals are more detailed than standard ones. The appraiser has to confirm the property meets minimum USDA condition standards too. Expect it to take about a week to get the appraisal back.
Underwriting Review
Now your loan application enters underwriting, where the lender will verify all your financial information and assess overall eligibility and risk.
The USDA underwriting process takes a little longer than conventional loans because there is an extra approval step…
Final USDA Approval
Before your lender can close the loan, your full application must get a final green light from the USDA itself. The lender sends your file over for USDA review.
This final sign-off typically adds 1-7 days. But if USDA offices are backlogged, final approval could take a few weeks. That’s why it’s smart to build extra buffer time into expected closing dates.
Closing and Funding
Once you get USDA’s thumbs up, the lender can close the loan. You’ll sign final documents, the lender disburses funds, and you get the keys to your new home!
How Long Does the Full USDA Loan Process Take?
As you can see, there are several steps involved in getting USDA approval. Most applicants can expect the full process to take between 30-60 days. However, it could stretch longer in some cases.
Here are some general timeframes to anticipate:
- Prequalification: 30 minutes
- Preapproval: 3 days to 1 week
- Making an offer/getting appraisal: 1 week minimum
- Underwriting by lender: 1-2 weeks
- Final USDA approval: 1 day to a few weeks
- Closing/funding: 1 week once approved
As soon as you have a signed purchase agreement, get documents over to your lender as quickly as possible. Promptly providing all required paperwork will help expedite underwriting and approval.
On your end, be responsive to requests from your loan officer and USDA staff. The faster all parties work together, the quicker you can move in!
Tips for Streamlining USDA Approval
While USDA loan approval may involve a few more hoops, there are some steps you can take to help optimize the experience:
Pick a knowledgeable lender. Opt for a lender who frequently handles USDA loans rather than dabbles in them occasionally. Their expertise can make the process smoother.
Get prequalified upfront. Gives you time to improve your credit or financial position before submitting a full application.
Compile all required documents. Have income, tax, and asset records ready to send to your lender right away to prevent delays.
Maintain current employment/income. Don’t switch jobs or open new credit lines mid-process, as major changes can complicate approval.
Stay in close contact with your loan officer. Quickly provide any additional documentation they need and ask questions along the way.
Build in a buffer before your desired closing date. Leave an extra 1-2 weeks minimum for hiccups like USDA backlogs.
Who Should Consider USDA Home Loans?
If you want to buy a home in a rural community, USDA loans provide affordable financing options. They are a great fit for:
- First-time homebuyers with limited funds saved for a down payment and closing costs
- Homebuyers with moderate incomes who fall under income limits for their area
- Those with less-than-perfect credit who may have trouble qualifying for conventional mortgages
- Anyone needing a low interest rate and low monthly payments
As long as you don’t mind a slightly longer approval process, a USDA loan can make owning a home in the countryside a reality.
The Bottom Line
The USDA home loan approval process takes roughly 1-2 months from start to finish. Getting prequalified in advance, promptly submitting all required documents to your lender, and selecting an experienced USDA lender will help expedite the process. With proper preparation and expectations going in, you’ll be settled into your new rural retreat before you know it!
USDA Loan Process & Timeline
If you are buying a home in a rural area and have a low-to-moderate household income, a USDA loan may be right for you. These mortgage loans backed by the United States Department of Agriculture offer many unique benefits to help you afford your first home. Such advantages include low-interest rates, lower mortgage insurance (PMI), and up to 100% financing. That’s right, no down payment!
We recommend you check out the rest of the articles in this series for additional information on USDA loans:
Today, we want to walk you through the overall process and timeline for USDA loans. Here is a simple step-by-step guide.
See if You Are Eligible
USDA loans are not available to everyone. They are designated for “rural” areas and can only be used for primary residences. The borrower must also meet certain income and credit score requirements. Please review Parts 2-4 of our USDA loans series for more detailed eligibility information.
How Long Does it Take to Process a USDA Loan?
FAQ
How long does it take for the USDA to approve a loan?
Why is USDA taking so long?
Why would a USDA loan get denied?
How long does it take USDA to review a file?
How long does a USDA loan take?
Once the USDA office has the file, they generally take up to a week to issue the final commitment and send it back to the bank or lender for closing. These turn times can greatly change based on the state, loan volume, etc. But most USDA offices take about 2–7 days. Ok, let’s break it down below:
How long does it take to get a loan approved?
It usually takes a couple days but may turn into a week or more, especially at busier times like after holidays. The final approval, also known as a “clear to close,” is issued once both the lender and the state RDO have approved your loan.
How long does a USDA loan take to close?
It generally takes between 30 to 45 days to close on a USDA loan. This USDA closing process begins with the initial contract and extends to the final closing day. Your closing timeline may vary depending on a variety of factors, but understanding the key stages can help you navigate it more efficiently.
How long does the USDA closing process take?
We receive many questions from USDA home buyers wanting to know how long the USDA closing process takes? As of 2023, Florida USDA loans are currently taking about 30-40 days to close from the time of the complete approved purchase contract. Keep in mind that USDA home loans go through a two-tier approval process before closing.
How long does a USDA Rural Housing Loan take?
USDA Rural Housing is the only loan program that requires this final step. During this step, USDA basically checks the lender’s work to ensure everything meets their handbook requirements. As mentioned above, this step takes about 1-7 business days to complete. Please note, the USDA turn times can/do change based on loan volume.
How do I get a USDA loan approved?
There is only one extra step in getting your USDA loan approved, compared to any other type of loan. That is the extra check by a USDA office in your state. With an FHA loan, VA loan, or conventional loan, the lender can completely approve and close the loan on its own.