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USDA Loans in Clay County, Florida: Learn How to Obtain a Zero Down Mortgage

Clay County, Florida, might be your hideaway, especially if you love unique nature encounters. Sure, it’s not as popular, but there’s more to Clay County than meets the eye. With plenty of biking and hiking trails, aquatic attractions, and parks, it’s the perfect destination for family holidaymakers, RV campers, and backpackers.

But the deal can get even better. What if you acquired a home in northeast Florida? It’s a notable area with an abundance of awe-inspiring cities, low costs of living, safe neighborhoods, and most importantly, home ownership is an option. “But how can I afford it on a low income?” Or, “with a bad credit?” – you may ask.

But as surprising as this may sound, purchasing a home in Clay County, Florida, may not be as hard as you imagine. And it can prove even much easier if you qualify for a zero-down USDA mortgage.


What are USDA Loans?

USDA loans are zero-down, low-interest mortgages proposed for individuals who can’t cut it for conventional mortgages due to low income or poor credit scores. In other words, they are mortgage options designed to help moderate- and low-income families residing in designated rural and suburban areas afford homes.

You may have heard of VA loans designed for veterans and backed by the Department of Veteran Affairs. USDA loans aren’t any different, except that they are backed by the US Department of Agriculture and are designed to help families or individuals in need of safe, decent, and sanitary housing get some.


Categories of USDA Home Loans

There are two types of USDA Mortgages:

  • USDA Guaranteed Loan
  • USDA Direct Loan

As mentioned earlier, guaranteed and direct USDA loans require no down payment and are offered to help low-income individuals afford homes in rural areas. However, they vary in some aspects. Let’s look at each in detail.


USDA Guaranteed Loan

USDA-guaranteed loans are offered by participating local lenders but are guaranteed by the USDA. For that reason, borrowers enjoy low mortgage interest rates, despite their low incomes and wanting credit scores.

To qualify for a USDA guaranteed loan, the lender must check your adjusted household income, which must not be more than 115% of the designated rural area’s median family income. Household income is the overall income of the borrower and any other grown-up household member, regardless of whether their information is included in the mortgage application.


USDA Direct Loan

Unlike the former, USDA direct loans are issued directly from the USDA rather than through local lenders. These loans are designed for one purpose: to aid very low- and low-income applicants afford safe, decent, and sanitary housing in USDA-approved rural areas.

USDA direct loans typically feature a 2.5% interest rate, and with subsidies, it may even go as low as 1%. According to the USDA, eligible applicants’ income should not exceed the stated low-income limit in their designated areas.


Who Qualifies for a USDA Home Loan in Clay County, Florida?

USDA home loans are accessible to US citizens, foreign nationals, and permanent residents, who are expected to make the new home their principal residence.

Nonetheless, getting these loans is no free pass; borrowers must meet specific qualifications before becoming homebuyers. A few key ones include:


Income Limits

Again, USDA loans are proposed to help moderate- and low-income applicants. Therefore, only individuals or families whose earnings don’t exceed the stated income limits will qualify.

To establish income eligibility, loan lenders check three figures:

  • Qualifying Income - Like other mortgages, the applicant must present their income to prove their ability to meet monthly loan payments comfortably.

  • Eligibility Income - Lenders add the total household income to determine if the borrower satisfies USDA’s income requirements. For instance, if the applicant lives with their partner, brother, and son (who’s past 18 years old), all their incomes are added to determine the household’s eligibility.

  • Adjusted Eligibility Income - The adjusted income is another thing that lenders pay attention to. It entails the figure after subtracting childcare expenses and those of dependent household members.

Generally, the applicant’s adjustable household income should not exceed 115% of the area’s median income. According to Jason Gelios, a seasoned realtor from Southeast Michigan, a family of one to four persons can be eligible with a maximum income limit of roughly $92,000, whereas one with five to eight members can have a limit of about $121,000.

To eliminate the income limit guesswork, utilize the USDA’s income eligibility calculator to see whether you satisfy your local income limit requirement.


Qualifying Location

Remember, rural development is one of USDA’s fundamental objectives, which explains why it only backs mortgages in parts showcasing scarcity in homeownership opportunities.

But these loans aren’t entirely exclusive to rural areas. In simpler terms, you may still qualify for a USDA mortgage in a suburban area, too, provided the location slots into either of the categories below:

  • Population not exceeding 10,000 in parts that are rural in character or open country

  • Population not exceeding 20,000 and not included in an MSA (Metropolitan Statistical Area)

  • Area with severe scarcity of homeownership opportunities for moderate- and low-income applicants

Do you wish to buy near a big city but fear that the location criteria exclude you? Well, as hard to believe as you may find it, your location worries may be unnecessary.

If there’s an area or property you desire, you can quickly figure out its eligibility by looking it up on the USDA’s interactive eligibility map. Suppose you’re not yet aware: 97% of the US mainland is location-eligible for zero-down USDA mortgages. So, you may have a good chance of getting what you want.


Credit Score

Typically, you’ll need a credit score of at least 620 to qualify for a USDA mortgage. However, take note of the term “typically.”

The minimum credit score requirements are not for the USDA to determine. So, they let the lenders set the guidelines – often, lenders require borrowers to have a score of not less than 620, sometimes 640. However, some may be open to offering flexibility in their credit score requirements.

One key thing lenders look at during your mortgage application is your credit history, including instances of defaults or delinquencies and on-time payments. Suppose they find one or two concerns; they may request an explanation about them and why you think there’s little possibility of them recurring with your loan payments.

Quick tip? Get quotes from multiple mortgage lenders to see who’s offering the most favorable terms and the best mortgage deal.

Similarly, if your credit score is poor, consider applying with various lenders to boost your odds of qualifying. One lender may disregard your application, but – you never know – another might find you eligible for the mortgage.


Debt-to-Income Ratio

To calculate your debt-to-income ratio, lenders total your debts, including any mortgage, and then divide the figure by your gross income. Generally, you require a 41% or less DTI to be deemed eligible for a USDA home loan.

Nevertheless, don’t give up if you have a much higher DTI. You may still be approved for a USDA loan, especially if other facets of your mortgage application are remarkable – say, substantial savings or an impressive credit score.

But, if possible, try to lower the figure as much as you can before applying to build yourself a better case. For one, you can start by settling your outstanding debt.


Property Requirements

Besides ensuring that the property is situated in a qualifying suburban or rural area, there’s one more piece to the puzzle – the home you wish to acquire must satisfy USDA’s property standards. Luckily, most of these requirements are new but similar to those featured in other mortgage programs.

However, some are exclusive to USDA home loans. They include:

  • The property must be residential and modest, with square footage not exceeding 2,000 sq. ft. and not less than 400 sq. ft.

  • The home must be the primary residence. Investment properties, multi-unit properties, and secondary residences don’t qualify for USDA mortgages.

  • The acreage size must be impossible to convert into commercial property or subdivide.

  • The property must satisfy USDA appraisal guidelines.

Father push cute little daughter sitting inside of carton box having fun riding in living room


Advantages of Getting a USDA Mortgage

USDA home loans are not just any other mortgage; they have a few advantages over other loan programs. A few well-known upsides of a USDA mortgage include:


Zero Down Payment

The zero down payment requirement is undoubtedly the most significant perk of getting a USDA home loan. In other words, USDA loan programs offer 100% financing to eligible borrowers, meaning they won’t necessarily have to put any amount down towards purchasing their home.

If you asked any first-time homebuyer, gathering enough money to make a down payment is the hardest nut to crack. For conventional loans, applicants are expected to make a 5% down payment, with FHA loans proving relatively more favorable at 3.5%.

For USDA home loans, however, a down payment is not mandatory. As such, they make an ideal option for repeat and first-time homebuyers.


Favorable Interest Rates

Remember, USDA loans are backed by the US Department of Agriculture itself, meaning borrowers enjoy low and all-inclusive mortgage interest rates that don’t fluctuate with income limits, down payments, or credit scores.

That differs from conventional financing, where the rates are determined based on the borrowers’ credit scores and the market.


Closing Cost and Down Payment Assistance

While the down payment isn’t required for USDA home loans, closing costs are inevitable. Luckily, USDA allows borrowers to leverage gift money or assistance programs to help settle their closing costs and if they like, their down payment.


Flexible Credit Requirements

As seen earlier, you’ll need a credit score of at least 620 to cut it for a USDA loan. But there are exceptions – applicants with limited or wanting credit scores can still stand a chance of being eligible, provided they demonstrate their willingness to repay the loan.


Low Mortgage Insurance Premiums

Generally, all loans with a down payment of less than 20% demand private mortgage insurance, and USDA home loans are no exception.

But unlike conventional and FHA financing, the mortgage insurance premiums on USDA loans are relatively much lower. And even better, they don’t fluctuate with your down payment. So considering the significant savings you will make from low insurance premiums, USDA mortgages are undoubtedly the better option.


Is Using Your Home Loan to Purchase a Home in Clay County, FL, a Great Idea?

Yes, no doubt. The weather in northeast Florida is excellent, and you can hardly exhaust the county’s numerous attractions. Clay County, FL, is a typical example of a hidden gem with a rich history, and if moving here is in your cards, it could be one of the best decisions you’ll ever make.

Speaking of attractions, here are some you’ll want to check out:


St. Johns Paddling Trail

Among Clay County’s recreation staples is St. Johns River, which you can explore and experience through paddling. When paddling down the waters, you’ll come across several archaeological and historical sites that you’ve got to check out and also catch spectacular views.

Moreover, remember to pack your binoculars! There’s an abundance of wildlife around the river for you to spot, from alligators to foxes, river otters, manatees, whitetail deer, distinct bird species, etc.


Fort Clinch State Park

With history-rich attractions and about 1500 acres of natural surroundings, Fort Clinch State Park is an allure for outdoor buffs, history enthusiasts, RV fanatics, and campers. The park is situated close to Fernandina Beach on Atlantic Avenue and boasts many interactive exhibits, isolated beaches, and a fort from the Civil War era.

As you’d expect, there’s much to do at Fort Clinch State Park, from biking and hiking to watching wildlife such as painted buntings and gopher tortoises roam around. Shark-tooth hunting, shelling, fishing, and camping are also additional activities you can try out while here.

And oh, remember to hit the park every month’s first weekend for a fun experience at the Civil War fort.


Amazing Grace Family Farms

Sure, hiking can get monotonous. And sometimes, the weather can be very unfriendly for you to be out there splattering in the springs.

On such days, Amazing Grace Family Farms can be the destination to inspire your day. The farm swanks more than 15 attractions such as a Corn Hoke, Cow Train, and Jump Pad – it’s undoubtedly one of the best places to have a family fun day!

During spring, you can head to the farm to pick your bouquet from the striking sunflower field and do a fun photoshoot!


Green Cove Springs Park

Do you crave an encounter with nature but don’t wish to visit Florida’s touristy and jam-packed destinations? Well, look no further beyond Green Cove Springs Park.

It’s yet another ideal spot for nature enthusiasts, boasting a spring-fed pool constantly refilled with cool water from a stream. So, during a typical Florida summer day, the Green Cove Springs Park can be your go-to destination, thanks to its natural, uplifting spring waters.

Further, the park boasts some swinging benches, shaded picnic areas, and a playground for kids to sweat it out.


Applying for USDA Home Loans in Clay County, Florida

With everything Clay County, FL, has to offer, don’t be surprised if it starts growing in you. After all, it’s a remarkable place, and living here could be a dream for many.

Fortunately, moving to Clay County isn’t rocket science, especially if you cut it for a zero-down USDA mortgage. To apply, here’s what to do:

  • For a USDA Direct Loan, refer to this USDA’s fact sheet, employ the provided resource for guidance, and submit your mortgage application to USDA Rural Development.

  • For a USDA Guaranteed Loan, check out USDA’s list of approved lenders and find one or a few operating in Clay County. Then, request your preferred lender to review your eligibility and consult them for any clarifications.

Ready to Become a Clay County Resident?

Are you set to acquire your dream home in Clay County? Well, make it happen!

With a USDA mortgage, there’s nothing to stand in your way of becoming a new resident of Clay County – not a bad credit score, a low income, and not the lack of a down payment. So, apply for your USDA mortgage today and live your dream!

With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.

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