The USDA (United States Department of Agriculture) mortgage program offers loans to help low to moderate-income individuals or families in rural areas buy, repair, or renovate homes. These loans are often referred to as USDA Rural Development loans. They typically have low interest rates and don’t require a down payment, making them an attractive option for those who qualify.

To be eligible for a USDA mortgage, both the property and the applicant must meet certain criteria. The property must be located in a designated rural area as defined by the USDA, and the applicant’s income should fall within the specified limits for their location and household size.

On April 8th USDA announced some changes to their guidelines that should be effective on May 6th 2024.

It is important to know what is happening especially if you have minimal or no credit as they have made it possible to create some easier non-traditional credit and other items.

USDA reached out to all of us and asked what are the barriers to lending with USDA and they are beginning to listen. This is good news!

On April 8th USDA announced some changes to their guidelines that should be effective on May 6th 2024.

It is important to know what is happening especially if you have minimal or no credit as they have made it possible to create some easier non-traditional credit and other items.

USDA reached out to all of us and asked what are the barriers to lending with USDA and they are beginning to listen. This is good news!

USDA GUIDELINE CHANGES

Added monthly subscription services and gym memberships to the eligible non-traditional credit options. Who does not have a Netflix account or one of the many subscription services. But you will have to prove a 12 month pay history. Fantastic!

USDA changes will include USDA will no longer require a donor’s bank statement when giving a gift. We now will only need proof of your account and a copy of donor funds by check or transfer to you plus a copy of the closing disclosure showing receipt of donor funds.

USDA is now allowing an insurance deductible for hazard insurance up to 5% to match the other agencies and flood insurance deductible up to $10,000.00. This is a big deal to make housing payments more affordable. Previously it was greater than 1K or 1%. On a side note it also says we must make sure it is reasonable and will not cause undue hardship to the borrower.

USDA changes clarified that tax transcripts are not required prior to closing but MUST be present when we deliver the file to them. That is going to be a lender decision to allow this as they will be required and if transcripts come back incorrect files cannot be delivered. It will be a risk situation for each lender.

In another section it used to say lenders must obtain and “review” transcripts prior to loan closing but now it says lenders must obtain and “review AVAILABLE transcripts prior to closing” which supports the above paragraph.

An interesting tweek to Chapter 16 it used to state the loan must close under the “same terms as underwritten” and approved on conditional commitment. Now it says “the same, or more favorable, terms as underwritten”. For those of you who know USDA know it has to go back for almost any changes. Now, maybe not. We will see how that is interpreted.

USDA changes clarified that you CAN use a written verification or an email to verify the employment within 10 days of closing. Email must have the name and title of the person completing the verification.

Applicants for USDA mortgages typically have to meet other credit and income requirements, and they must intend to use the property as their primary residence. Additionally, there are limits on the loan amount based on the applicant’s income and debt-to-income ratio.

It’s essential to check the specific eligibility requirements and available programs in your area, as they can vary depending on location and other factors.

These are all good USDA changs to help you be able to to qualify when getting a USDA Loan.