How do USDA home loans work? (another buying a home thread)

[alexmama]

I know the rural housing development is for low income families, but has anyone received a USDA home loan what was the process?How was it different from a traditional loan? I am a home buying novice so excuse my ignorance. Thanks for the help. If you would rather PM me thats fine too.

[adavieau]

We have one, I think the criteria (keep in mind this was 4 years ago) for us were your income had to be less than $75K and the town you were buying the house in had to be considered "rural" (there was an approved list) and it had to be your primary residence. Back when we did it one of the main advantages were you didn't have to pay pmi just a 2% guarantee fee (that could be financed in with the loan) and only had to put 3% down. I think they've reworked the no pmi/guarantee requirement a bit since then though.

[alexmama]

Originally Posted by adavieau We have one, I think the criteria (keep in mind this was 4 years ago) for us were your income had to be less than $75K and the town you were buying the house in had to be considered "rural" (there was an approved list) and it had to be your primary residence. Back when we did it one of the main advantages were you didn't have to pay pmi just a 2% guarantee fee (that could be financed in with the loan) and only had to put 3% down. I think they've reworked the no pmi/guarantee requirement a bit since then though.

How "fantastic" did your credit score have to be?

[nmrgrl55]

We are looking it to one of these loans and I am pretty sure your credit score needs to be at least 640.

[Nickel+3]

Our scores were 670 and it was a zero down loan

[alexmama]

Thanks!

[silvaheyes]

We have a mortgage through USDA but we didn't apply for the mortgage ourselves. My Mom bought the house in the late 80's under her name and we did an assumption, taking over the mortgage.

From our personal experience STAY AWAY! Sure it's nice that they service low income families but our mortgage literally is not going down. The interest rate is 9% (I'm sure this has to do with the time she originally got the loan). The way ours works is it goes by income, we make a lot of money so our mortgage payment is at the max it can go. However what they do not tell you is they have what they call a 'bucket' and say you don't qualify for the max payment. They take whatever you didn't pay and shove it in there. So our statement says we only owe $29k on the mortgage but in reality it's around $40-50k, my Mom bought the house for $40 something thousand when she originally bought it!

Ask around and see if anyone you know or someone that you know knows someone who has ever paid off their mortgage from USDA because we have NEVER met anyone who has. Our old neighbor (we use the house as rental now) paid off her mortgage 3x and STILL owes on it.

We are refinancing it so hopefully we can get it paid off in 15 years. Between my Mom and us both paying on the mortgage over the years, it's been 22 years.

[alexmama]

Originally Posted by silvaheyes We have a mortgage through USDA but we didn't apply for the mortgage ourselves. My Mom bought the house in the late 80's under her name and we did an assumption, taking over the mortgage. From our personal experience STAY AWAY! Sure it's nice that they service low income families but our mortgage literally is not going down. The interest rate is 9% (I'm sure this has to do with the time she originally got the loan). The way ours works is it goes by income, we make a lot of money so our mortgage payment is at the max it can go. However what they do not tell you is they have what they call a 'bucket' and say you don't qualify for the max payment. They take whatever you didn't pay and shove it in there. So our statement says we only owe $29k on the mortgage but in reality it's around $40-50k, my Mom bought the house for $40 something thousand when she originally bought it! Ask around and see if anyone you know or someone that you know knows someone who has ever paid off their mortgage from USDA because we have NEVER met anyone who has. Our old neighbor (we use the house as rental now) paid off her mortgage 3x and STILL owes on it. We are refinancing it so hopefully we can get it paid off in 15 years. Between my Mom and us both paying on the mortgage over the years, it's been 22 years.

how is that legal? Is it just because of the interest rate?

[silvaheyes]

Originally Posted by alexmama how is that legal? Is it just because of the interest rate?

I'm honestly not sure.. Like I said, on our statement it has $29k that we owe left on the loan but we asked them for the pay off amount and they are sending us the amount by mail. We've asked for it before and there are a ton of extras/fees/etc.

[poohbear1208]

We have a rural development loan. It's awesome!! We have 4 kids, so we were able to make up to 123k to qualify. That's entirely dependent on area, so you will have to check into specific counties for income guidelines. Our interest rate is 3.25%. We had zero down as well. The process is very similar to a regular loan, it just takes slightly longer for underwriting. Our whole process from offer to closing was under 90 days. And we don't have the "bucket thing" that someone else referred to. Our loan operates no different than a regular FHA loan.