The United States Department of Agriculture Financing

Welcome to Saving Thousands with Robert Palmer.Let's look at a type of mortgage financing the requires no down payment and is very popular here in Florida. That's USDA financing.The United States Department of Agriculture offers financing to homeowners who want to purchase a home in rural areas set aside by USDA. USDA offers 30 year residential mortgage loans to consumers who meet certain income criteria when the homes are located in these designated areas as determined by the local RD, or rural development office.

The state of Florida has many areas that are eligible for USDA financing. The easiest way to determine if the home you're looking at is eligible for USDA is to check the Florida USDA mortgage website. You can do this at eligibility.sc.egov.usda.gov. And you can also get a link from my website savingthousands.com.Under Property Eligibility on the side of that site, you'll click on Single Family Housing. And then using a map, you can see that much of Florida outside of the cities is eligible for USDA financing. And you can actually put in specific addresses and have them shown on the map as well.

In addition to location, the next important requirement is income limits. For most Florida households between one and four persons, the income limit is $74,750 per year. So you can see your household could have a pretty decent income and still qualify for USDA.In certain counties and for larger household sizes, the limits can go as high as $120,200. You can check the exact income limits for your household size and county on the same website by selecting Single Family Housing under Income Eligibility. To get a USDA loan, you must earn less than these income limits and be purchasing a property that's in the eligible area. And again, both can be checked at that website, and you can find a link to it from my website savingthousands.com.

Income earned by anyone who will be living in the home with you is counted toward the income limits, not just the borrowers on the loan. All members of the household of working age will need to provide tax returns so their annual income can be determined and counted against the limits.

Also, if you do exceed the income limits, there are some expenses you may be able to deduct from your income to get below the limits. They're deductions for the number of dependents you have, daycare expense, and elderly parent care expense as well. You should work with your mortgage company to determine if you have any of these eligible deductions if you're close to the income limits.If you meet the property location and income limit requirements, a USDA loan is a great way to purchase a home with no down payment. Because USDA offers 100% financing on home loans, you're able to purchase a home with just a few thousand dollars out of pocket which you'll need to help cover inspections, appraisals, and some closing costs.

USDA loans also have lower closing costs than FHA, or Federal Housing Administration loans, making them more affordable and the monthly payments lower. Most mortgage companies offer USDA home loans so it's important to shop around and make sure you're getting the best deal.

One other thing to consider with a USDA loan is that the mortgage company has to send the actual file to the USDA office as a part of the approval process. After the mortgage company has underwritten and approved your loan, the local USDA office is required to review and approve your loan as well. And this can lead to a slow down in the mortgage process. USDA loans will take longer to close than other types of loans because of this added step of the file being underwritten by USDA in addition to the lender. Some of the USDA offices are very backlogged and take as long as three weeks to review files.

For this reason, it's important to work with a lender who can get your file to the USDA office as quickly as possible and get the process started. Some lenders take 60 days to get the far ready for USDA, and then it's another 21 days for the USDA review, leading to months of waiting. With a little shopping around and research, you can find a lender who will get your file to USDA much more quickly and cut down the waiting time for your new home.

Another thing to look at is in return for guaranteeing your mortgage to the lender, which is what allows you to get this 100% financing, USDA charges a guarantee fee, which is a form of mortgage insurance. These guarantee fees are financed into the loan and change from time to time but are lower than similar fees charged on FHA loans.

So let's recap the USDA home loan. 100% financing, but you'll still need a few thousand dollars to cover appraisals, inspections, insurance, and some closing costs. Lower cost than FHA loans because the USDA guarantee fees are less than the FHA mortgage insurance premiums. It requires a property to be in an eligible area. It requires the household income to be below the income limits. And the file must be approved by both the lender and the local USDA office.

And always shop around. Interest rates and fees are set by lenders not by USDA, so shopping around can save some money.To learn more about Florida USDA loans and for useful links, visit savingthousands.com and enter keyword USDA. And remember, you can always join the conversation on the Saving Thousand forums at savingthousands.com where you can ask me questions any time.We are listening to you. Coming up, Robert answers your questions straight from our web forum at savingthousands.com.