Get Qualified For the USDA Guaranteed Loan Program
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USDA LOAN - HOME SELLER CHECKLIST
USDA INCOME AND GEOGRAPHIC ELIGIBILITY GUIDELINES - GENERAL
Must be in an eligible USDA Rural Development Location. To determine if the property is in an eligible USDA area follow these instructions:
- Go to the USDA Rural Development Website
- On the left hand side tool bar, under “Property Eligibility”, click “Single Family Housing”
- Click “Accept”
- Enter property address to determine if a specific house is located in an USDA eligible area
PROPERTY SPECIFIC
Eligible Properties
- Existing attached & detached single family residences
- New construction with permanent financing only
- PUD’s (i.e. Townhomes)
- Condo-units. HUD, VA, FNMA or FHLMC approved project
Ineligible Properties
- Co-ops
- Mixed-use
- Condotels
- Manufactured homes
- Log cabin homes
- Single Family Homes where the land value exceeds 30% of the appraised value AND can be sub divided.
- House not in move-in condition (i.e. no “fixer-uppers”)
- No income producing properties
- Agriculture structures
- Outbuildings that sync up with home buyers skill set (i.e. large garage with car lift being sold to an auto mechanic)
- Ability to rent portion of the house
- Separate living areas with dedicated entrances
- Kitchenettes
- Duplex
If land value based on the appraisal report exceed 30% of the appraised value:
- Land can’t be subdivided
- Appraiser must indicate lot size is normal for the area
If the property is on well and septic
- 75 feet between well head and septic tank (can be 50 feet if approved by County)
- 100 feet between well head and septic drain field
- Well head must be at least 10 feet from adjoining property line and roadway
STRUCTURING THE TRANSACTION
- Down payment Requirement –
- No down payment is required
- Seller Contribution
- 6% of the purchase price towards closing costs, prepaids, discount points, buydown fees, and upfront Commitment Fee
- Assume that your home buyer will have minimum cash to close. Structure the transaction with a seller closing cost assist equal to the home buyers closing costs, cost to establish the escrow accounts, and one year homeowner insurance premium
QUALIFYING YOUR HOME BUYER
As the property seller you should only accept an offer to purchase your home from a home buyer that has been qualified by a lender knowledgeable about the USDA Loan Program and has completed a reasonable level of due diligence regarding the borrowers qualification for the loan program.
At Bridgeview Bank Mortgage our focus is on getting USDA Loans approved. This means Bridgeview Bank Loan Officers will perform a high level of due diligence when pre-qualifying a borrower for a mortgage, which includes:
- Obtaining a credit report from all three credit bureaus
- Verifying income documents, including W-2’s for the last two years, recent paystubs, and tax returns for the last two years if the borrower is self employed
- Verifying asset documents for the last two months
- Preliminary approval is run through USDA Guaranteed Underwriting System or GUS
While borrower specific information, such as credit scores, income, the bank account balance, are private and confidential, and can’t be disclosed to the home seller, you have a right to ask the following questions: - Does the credit score require the loan to be manually underwriter – if the borrowers credit score is less than 640 the file must be manually underwritten
- Does the borrower have enough cash to get through the settlement process
- Has the loan request been run through GUS and what is the approval level (i.e. Accept/Eligible is good, Accept/Refer requires a manual approval process)
PROPERTY INSPECTIONS - TO BE OBTAINED BY THE HOME BUYER
- Make sure your home will meet USDA eligibility requirements, as documented in the appraisal report:
- No chipped paint
- Hand rails on all stairs – indoors and out
- No holes in the wall or missing electric cover plates
- Water stains on ceilings should be repainted and the root cause (i.e. water damage) resolved
- All windows working with no broken glass
- Pest inspection – if evidence of infestation is present be prepared to incur the cost remediation
- Water test (if the property is on well water) – property must comply with local restrictions for lead, nitrates, nitrites, and ecoli
- Septic certification – Distance from the well head and septic holding tank and/well head must be visually measurable by the appraiser. If the appraiser cannot determine the distance between the well head and septic system a septic certification may be required