Changes are coming to the USDA loan on October 1st

I just received word from the USDA the upfront guarantee fee for the USDA Rural home loans will be going down from the current 3.5% to 2% on October 1, 2011.  The USDA will also institute an annual  fee of .3% of the loan amount.  This fee is new and similar to to the mortgage insurance fee currently in place by FHA (although USDA's fee is much lower).

USDA loans are one of the few products left that provide 100% financing. The guidelines are more restrictive than FHA in regards to debt to income qualifying ratios.

The USDA loan requires income eligibility since it is for modest and low income borrowers.  However, they allow adjustments to the income for the number of people residing in the home and for child care expenses.

The property also must be in an area approved for USDA financing.  You can go to this website to enter the address of the property to see if it qualifies for USDA financing.

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

USDA loans are underwritten by the lender and then sent to the USDA for approval.  Keep this in mind when calculating closing dates.  Allow for a 45 day close.

Always use a licensed loan originator experienced in USDA loans.