The USDA loan program helps low- and middle-income consumers become homeowners in communities across the country.
These government-backed loans allow qualified buyers to purchase with $0 down. They also feature competitive interest rates and low mortgage insurance costs.
The United States Department of Agriculture (USDA) offers direct home loans to low- and very low-income homebuyers in rural areas through its Section 502 Direct Loan Program. These loans require no down payment and have interest rates below conventional market rates. If you’re looking to buy a home in rural Georgia, a USDA home loan may be a great option for you. This article will walk you through the process of applying for a USDA direct home loan in Georgia from start to finish.
Determine If You Are Eligible
Before applying, you’ll want to make sure you meet the basic eligibility criteria for the program. Here are the key requirements to receive a USDA home loan in Georgia:
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Your household income must be below the income limits set for your county, Income limits vary by location but typically range from moderate to low income levels, You can check the income limits here
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You must be unable to obtain traditional financing from other lenders. The USDA loan is intended for borrowers who can’t qualify for conventional mortgages.
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The home you wish to purchase must be located in an eligible rural area You can verify your property’s eligibility using the USDA Property Eligibility Site
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You must be a U.S. citizen or qualify as a legal resident alien.
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You must demonstrate a willingness and ability to repay the loan.
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The home must be modest, without any income-producing features, and fall below the area’s loan limits.
If you meet these basic criteria, you can proceed to the application process.
Gather Required Documentation
When applying for a USDA direct home loan, you’ll need to submit documentation to verify your eligibility. Here are some of the key documents you’ll need:
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Identification: Driver’s license, birth certificate, permanent resident card, etc.
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Income verification: Pay stubs, tax returns, benefit statements, etc. You’ll need to document all income sources for everyone in your household.
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Asset documentation: Bank statements, retirement account statements, real estate owned.
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Credit history: The USDA will pull your credit report.
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Debt information: Mortgage statements, student loan details, credit card statements, etc.
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Earnest money receipt: If you are under contract to purchase a home already.
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Residence history: Rental references or rent payment records.
Be sure to gather 2-3 months’ worth of statements to support each source of income, assets, and debts. Having all your documentation ready will help streamline the application process.
Submit Your Application
In Georgia, you can submit your USDA home loan application package electronically to the email address [email protected].
Your application package should include the following completed USDA forms:
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Form RD 410-4: Application form
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Form RD 3550-1: Authorization to Release Information
Attach all your supporting documentation as well. The USDA offers guidance on putting together your application package here.
You can also submit a paper application via mail or in person if you prefer. Just contact your local USDA Rural Development office to obtain the forms.
Get a Property Appraised
Once you have submitted your application and documentation, the USDA will review your eligibility. If approved, the next step is getting the property you wish to purchase appraised. The appraisal determines the maximum loan amount you can borrow.
As the borrower, you will be responsible for paying for an FHA-approved appraiser to assess the property. The cost is typically $300-$600. The USDA provides a list of eligible appraisers. Be sure to use one on the approved list.
Receive a Certificate of Eligibility
After your application is approved and the property appraised, the USDA will issue you a Certificate of Eligibility (COE). This certificate states the maximum loan amount you qualify for based on your income, assets, debts, and the property appraisal.
The COE is important because it shows sellers and real estate agents that you are eligible for USDA financing. Provide a copy of your COE to your real estate agent so they can specifically look for properties that fall at or below your approved loan amount.
Shop for a USDA-Eligible Home
Now comes the fun part – finding the perfect home to purchase with your USDA loan! Concentrate your home search in USDA-eligible rural areas and look for homes priced under your COE’s maximum loan limit.
Some tips for choosing a USDA-eligible home:
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Stick to single-family homes, townhouses, or condos. No multi-unit properties allowed.
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Avoid properties with income-producing features like basements or garages converted into apartment units.
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Make sure the home passes required inspections. More on this later.
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Look for homes marketed as “USDA-eligible” by real estate agents.
Your USDA direct loan can be used to purchase existing homes or newly constructed homes.
Make an Offer and Enter Contract
Once you’ve found your dream home, make an offer and enter into a purchase agreement just like any other homebuyer.
Be sure to make your contract contingent on obtaining USDA financing. This allows you to cancel without penalty if your USDA loan doesn’t get approved.
Provide a copy of your COE to show the sellers you are qualified for a USDA-backed loan.
Get an Independent Home Inspection
Before closing, the USDA will require a home inspection performed by an independent inspector. As the buyer, you must pay for this inspection yourself. Costs range from $300-$500 in most cases.
The inspector will look for any major defects or problems with the home. If issues are found, you can request the seller make repairs prior to closing.
Close on Your USDA Home Loan
The final step is closing on your mortgage! A title company or closing attorney will prepare all the legal documents for you and the sellers to sign.
At closing, you’ll need to provide:
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A homeowner’s insurance policy with USDA listed as additional insured
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Payment for any closing costs not financed into your loan
Once all documents are signed and payments distributed, you’ll receive the keys to your brand new home!
Throughout the entire process, be sure to stay in close contact with your USDA home loan officer. They will guide you through every step and help ensure your loan gets approved and closed on time.
Enjoy Your New Home with a USDA Loan!
Buying a home is exciting, and doing it with a USDA direct loan makes it even sweeter. You get to own the home you want with no down payment required.
Just be sure to follow all the steps above to apply, get approved, and close on your mortgage smoothly. USDA home loans are an incredible program for eligible borrowers to achieve rural homeownership. If you think you may qualify, don’t hesitate to begin the application process and make your dream of homeownership come true!
Find a USDA Lender
USDA home loans come with income and property eligibility requirements. Finding a USDA-approved lender is a solid first step to getting one. Not every lender is.
- Property must be your primary residence
- Household income meets county USDA income limits
- Must be a U.S. Citizen, U.S. non-citizen or qualified alien
- Property must be in USDA-eligible location
- Minimum 620 FICO credit score
- Identify and clear any red flags or derogatory credit history that may complicate or delay your purchase.
If your credit score is below 640, your lender will need to manually underwrite your loan before submitting for USDA approval. The application process may require a little more documentation and take a little extra time and patience.
Getting preapproved is a key step for buyers. USDA loan preapproval gives you a solid look at what you can afford, and it shows home sellers you’ve got what it takes to make good on an offer.
When you apply for a USDA home loan, your lender will outline what documents are needed to verify the income you plan to qualify with.
USDA loans consider the total household income when determining what you can afford. Lenders will often need the following from you and each income-earning adult who will be living with you:
- Paystubs
- W-2s
- Bank statements
- Social Security Awards letter, if applicable
- Photo ID
USDA loan lenders will consider your total household income in relation to your major monthly debts. They use this debt-to-income ratio (DTI) to clarify how much you can afford and what they are willing to lend you.
The USDA loan program considers both front and back-end DTI ratios. The front-end ratio considers only your proposed monthly housing cost in relation to the monthly income. The back-end ratio looks at all major monthly debts, including the new mortgage payment, compared to monthly income.
For manual underwriting, USDA benchmarks for DTI ratio are 29% for the front end and 41% for the back end. However, USDA lenders often work with borrowers whose DTI exceeds these guidelines, and loans submitted through the USDAs Guaranteed Underwriting System dont require any specific DTI ratio.
Above all, preapprovals are not guaranteed loan approvals. You must satisfy all credit and income conditions from underwriting. And the property must pass a USDA appraisal before final loan approval can be issued.
About the USDA Loan Process
Applying for a USDA home loan starts with prequalification. Getting prequalified with a USDA lender requires a credit check and a brief income review. USDA qualifies applicants using income from each adult earner in the household, regardless of whether they’re obligated on the loan.
Before you apply, have an idea of:
- How much you’d like to borrow
- Your household’s total monthly income
Preapproval puts you in position to make an offer once you find an eligible property. Lenders request income documentation to confirm your income and USDA eligibility before they will issue a preapproval. How long this takes depends on you. Providing all income documentation in a timely manner will help you get preapproved faster.
Once you’ve signed a purchase agreement, the USDA loan application process typically takes around 30-45 days. The faster all parties work together to complete and provide documents for loan approval, the quicker final loan approval and closing can happen.
5 Things You Need to Know About USDA loans
FAQ
Is it easier to get FHA or USDA?
How long does USDA pre-approval take?
What is the most you can borrow from an USDA loan?
What is a USDA guaranteed loan in Georgia?
USDA Guaranteed Loans (also known as USDA Section 502 Guaranteed Loans) are a mortgage program for low and moderate income mortgage applicants. Georgia USDA loans provide low-cost, government insured mortgage options that suit a variety of home buying needs. The most common mortgages offered through USDA are known as “Guaranteed” loans.
What is the maximum loan amount for USDA Rural Home Loans in Ga?
Maximum Loan Amount: There’s no set maximum loan amount for USDA rural home loans in GA. Instead, your debt-to-income ratios dictate how much home your can afford (29/41 ratios). Additionally, your total household monthly income must be within USDA allowed maximum income limits for your area.
How do I get a USDA loan pre-approval?
As for USDA loan pre-approval, below we have listed some important factors: USDA credit score qualifications: 620 and above credit score is required by most lenders when financing 100%. Additional requirements may apply for any home buyers that have had past credit hardships like bankruptcy, short sale, foreclosure, etc
Should you get a USDA loan if you have a down payment?
USDA loans are especially a good program for first-time home buyers that have little cash savings for other loan programs that require a down payment. But even if you are a home buyer that has 3% or 5% or 10% for a down payment, you may want to still take a close look at the USDA loan. Why? monthly mortgage insurance!