What are the requirements for the USDA program in Houston? So that’s going to be looking at a 640 minimum credit score requirement.
There is a income requirement too when applying for a USDA Loan Houston.
So basically the income requirement is about 78,000 if you’re in a family of 1 to 4 if you’re in a family of 5+ that’s gonna go up to about $103,000 on the income limit.
The big requirement for USDA is that it’s property specific.
It’s got to be in a USDA Approved Zone. How much down payment does this program require?
It’s actually 0% down payment which is Great!
Ok Awesome, and how much does the average home buyer come in with out-of-pocket?
So because your down payment for a USDA Loan in Houston is covered you’re just gonna have to come in with again your prepaid and closing cost So if it was a $300,000 purchase.
you’d be looking at about $7,500 cash for keys to get in the home.
What type of home buyer is the USDA Loan program Ideal for? So this is going to be ideal for the home buyer that’s looking for a property in those specific areas.
Ideally it’s properties that are going to be USDA Eligible rural zones.
So not right in the middle of the city, but maybe if it’s more on the outskirts, on a little bit of land, lower tax rate areas that’s probably going to be a property that’s eligible and that would be ideal because that one would probably qualify OK, Fantastic.
What is a USDA Home Loan?
I bet you’re wondering, what is a USDA home loan?
Designed with the residents of more rural areas in mind, the United States Department of Agriculture designed its loan program to enrich rural communities by providing affordable home loan options to low-income households that may not be able to secure home financing through other means.
Who has time to stop and smell the roses? You don’t, and this isn’t even a rose.
What are the requirements for the USDA program?
So USDA has a few interesting requirements First of all, you’ll need to have at least a 580 credit score Some lenders require a 620 credit score.
Your household income has to be under the county maximum Like a lot of down payment assistance programs. This is based on family size So 1 to 4 is one category and then 5 and above is a higher threshold for qualifying
What’s unique about this one is the home has to be within a designated area.
So, Typically what that means is.
NOT within a metropolitan area So within our area here (Riverside county) Our local cities around her don’t qualify But we only need to go 10 miles away to where there’s an open area where there’s Several homes that qualify.
USDA stands for United States Dept of Agriculture But it’s NOT a farm loan.
Specifically, they don’t finance this program for farms in Houston.
It has to be a Single Family home in the Houston area, without a barn structure on the property.
Then it also has some home price limitations.
The Threshold is a little bit lower than say an FHA loan for the loan limits.
Ok, and how does this program differ from other Down payment programs?
So it’s different because it’s not really a down payment program but it allows financing up to a 100% of the purchase price And it’s interesting because you can actually use this program with 1 or 2 of the other programs.
If you need closing cost assistance But, what’s unique it’s a 100% Financing so you don’t need a 2nd or a 3rd lien on the property.
Your interest rates are typically lower than if you combine it with a down payment assistance programs and you don’t have to repay any down payment assistance.
It has a monthly factor It’s like mortgage insurance upfront It’s financed at a monthly component.
Much less than FHA So if you can qualify for this program It’s better than FHA And As I mentioned, rates and payments Are typically lower on this program So USDA is really a great program.
And on average How much does the home buyer have to come in with out-of-pocket?
So Again, we are financing the whole loan Purchase price up to 100% So the only thing remaining is then the closing costs Typically, plan on around 3% of the purchase price for funds to close.
The question there then becomes, Well, Where does that come from? Typically, we ask the seller to cover those costs And if we can get the seller to cover 3% Then, the buyer may only need to come in with an earnest money deposit.
And they may even get most or all of that back.
If the seller is covering all the fees.
One unique feature about USDA Versus all other loans is that if the home appraises for more than the purchase price.
We can finance the closing costs up to that appraised amount So, no other loan I know that we can actually finance the closing costs.
What type of home buyer is this program ideal for?
So certainly those that don’t have access to money for a down payment Anyone that wants to live that doesn’t have to live within a metropolitan area because, again, the house has to be in an area that is not in a high densely populated area.
It’s also suited well for people who have some credit issues and anybody that qualifies for this program would definitely be better served than going FHA so those type of people.
And besides the Area restrictions are their any other property restrictions? So property restrictions are going to be similar to FHA They’ll do manufactured homes.
They’ll do homes with Casitas So no real other restrictions.
Just if it conforms to the FHA guides then it should qualify for USDA There’s a couple little quirky things that you don’t run into very often like you can’t actually have a barn on the property It definitely can’t be for agricultural purposes It has to be for residential purposes.
USDA Loan Houston – Do You Pre-Qualify?
I don't want your client's loans.
I don't even want to hear from them.
In fact, I'm gonna show you how to make it so that they never have to hear from me, but they can still get our low rates and our low fees from your preferred lender.
Tt's actually pretty simple.
On your next deal, in fact, on the deal you already have in escrow, get your clients to agree to let you send me these four pieces of information.
I'll put together our rates and fees for their scenario and I'll shoot it over to you.
Then you can take that into your current preferred lender and say, "Hey buddy! Hook my clients up, just this once?" Wait, I said that all wrong.
"Hey buddy! Hook my clients up, Every time!" If they're willing to hook your clients with our low rates and our low fees, every single time, then I don't want their loans.
I don't even want to talk to them.
But if they're either unwilling or unable to do that, then you need to know that we are both willing and able to do that for your clients.
You owe a fiduciary duty to your clients to do what you know is right for them.
If your current lender is willing to do that for them, then stop watching this video.
But if they're unwilling to do that then finish up this video, shoot me a DM on facebook, give me a call, shoot me an email! Whatever it takes, let's get together and do what's right for your clients, every time.
Ryan Venz discusses USDA Loans.
- [Interviewer] In money,hard money lending, there's almost no lender thatdoes a consumer-purpose loan, or will consider an owner-occupiedconsumer-purpose loan.
How's it possible forPacific Private Money to do these types of loans,where other people can't? - Well, it's funny becausewe hear all the time, oh it's illegal to do a private money loan or a hard money loan, on anowner-occupied residence, and that's simply not true.
The regulations allow it,it's just you have to follow very specific underwriting guidelines.
First of all, you haveto be licensed to do it.
And a lot of people in theprivate lending business, are not willing to go outand get the NMLS license.
They're not willing to becomea mortgage loan originator.
So the extra licensing, itcosts money and it takes time.
You also need to have theunderwriting guidelines, which we paid our law firm alot of money to help us create those underwriting guidelinesso we could be in compliance.
And, so, at the end of theday we need to make sure that they have the ability toafford those monthly payments.
There's also certain otherrules and regulations, for example.
Instead of a 10 day due date,it's a 15 day grace-period, late charges are less, you're not allowed tohave default interest.
So there's a number ofconsumer protections in there, but we really like the loan product, because there's a need for it, there's a demand for it, it helps people to purchasehomes when they couldn't otherwise or to borrow moneyto improve their home when they couldn't otherwise do that.
So it's not illegal, it'sjust you have to do it within the guidelines of the law.
- You have to know the law, yeah.
- [Interviewer] So it soundslike most private hard-money lenders just don't have theinterest or the infrastructure-- - Maybe the resources, - [Interviewer] Or theappetite for doing-- - Yeah, it's more expensive.
You have to scale up.
You have to hire peoplewho know how to underwrite, and produce theconsumer-driven disclosures, you have to have the software.
So between the licensing, the staffing, the paying for the education and the underwriting guidelines, and producing, and the time involved.
It's just, it's more overhead, of course, to do these things, but we just, we like the business model.
We think there's a strong need for it.
It's an underserved market, and we like underserved markets.