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

Are you planning to purchase a home but raising a down payment seems challenging? You can turn to a USDA home loan since it offers zero down payment financing on your first home purchase. The reasons to love the USDA zero-down loan program include flexible credit score requirements, competitive interest rates, and 100 percent financing.

And if you qualify, you get to free up money for closing costs, new furniture, moving costs, and emergency savings.

A USDA home loan will be an ideal financing solution for a property situated in a less dense area. In Hillsborough County, USDA-designated areas include Apollo Beach, Fish Hawk, Sun City Center, Riskin, and Thonotosassa. With that said, here's what you should know when looking to get a loan in Hillsborough County, FL:

What is a USDA Home Loan?

As a government-backed mortgage, a USDA home loan targets low- and moderate-income borrowers in various rural or suburban areas looking to become homeowners. Though they are pretty new compared to VA and FHA programs, they are a better option if you want to buy a home with no money to put down.

The USDA Single-Family Housing Direct Loan and USDA Single-Family Housing Guaranteed Loan are the two types of home loans offered through the USDA loan program. You may turn to the Single-Family Housing Direct Loan, lent by the government if you have a very low income (50 to 80 percent of your area's median income). On the other hand, a Single-Family Housing Guaranteed Loan, offered through private lenders, can favor you if you are a low or moderate-income borrower.

USDA Loan Rates and Limits

USDA loans have similar mortgage rates to VA loans. In this case, they boast lower rates than conventional and FHA mortgages. Their overall costs are significantly lower than FHA since they come with lower mortgage insurance and interest rates.

Expect a loan limit of $336,500 when taking a USDA Single-Family Direct Loan in Hillsborough County, FL. The limits can be higher if you're purchasing a home in a USDA area with high housing prices.

Advantages of Taking a Zero-Down USDA Mortgage

A USDA zero-down mortgage can help you free up cash for moving expenses, closing costs, and other expenses. They come with attractive features such as competitive interest rates, low mortgage insurance premiums, and down payment assistance, as discussed below:

Zero Percent Down Payment Requirement

One of the attractive features of a USDA mortgage is the zero percent down payment requirement. Unlike other government-backed loans that require up to a 20 percent down payment, the mortgage can save you lots of money upfront. You won't have to build up enough savings to put any money down in your journey of becoming a homeowner.

Competitive Interest Rates

As a government-backed home loan program, USDA minimizes mortgage lenders' risk when giving you a loan. The program incentivizes lenders to institute low-interest rates with no down payment requirements. As a result, a lower interest rate translates to lower monthly mortgage payments and lower interest paid during your loan.

Lower Mortgage Insurance Premiums

Most zero and low-down-payment home loans come with mortgage insurance to cover lenders' risk when issuing you a loan. USDA mortgages are no different since they require mortgage insurance premiums.

For a conventional loan, you must pay private mortgage insurance premiums until you attain 20 percent home equity. FHA loans require an upfront and ongoing MIP (mortgage insurance premium) for the course of the loan. Though VA loans don't have a MIP requirement, you'll have to pay a funding fee on the mortgage, which is a percentage of your home's purchase price.

You get to save more on mortgage insurance with this home financing option. USDA loans are better than conventional FHA and VA loans since they only require lower MIPS. The USDA-approved lender will expect you to pay an upfront Guarantee Fee as well as the MIP.

Available for Multiple Property Types

With a USDA mortgage, you can buy a wide range of properties. These properties include a fixer-upper, manufactured home, condo, and a single-family home. You can also use the loan to buy land to build a new construction home.

However, you can't use the home loan to buy a vacation home or an investment property since they won't serve as your primary residence as required by USDA. The same applies to multi-unit properties even when you plan on living in one unit.

Assistance and Gift Funds Allowed

A USDA home loan can give you access to many assistance programs, which mostly come in the form of grants. The catch is that you won't have to repay these grants. You may also qualify for a forgivable loan if you reside on the property for a given time.

Requirements for the Zero-Down USDA Loan in Hillsborough County

The basic requirements for a zero-down USDA home loan in Hillsborough County, FL, include U.S citizenship and proof of permanent residence. The loan program may also consider you if you are a foreign national or were ineligible for conventional home loans.

Like other mortgage programs, you must meet various debt-to-income, income, and credit score requirements to qualify. You also have to buy the property in a qualifying location as explained below:

Qualifying Location

Since the USDA mainly focuses on rural development, its mortgage program only backs home loans in areas that need a rise in homeownership opportunities. You can also get the loan in a suburban area, outside a rural area, provided the place meets the following conditions:

  • Lacks mortgage opportunities for both low and moderate-income borrowers
  • Has a population of 20,000 or below and is not situated in a Metropolitan Statistical Area
  • It has a population of 10,000 or below and lies in an area with a rural or open country character

In Hillsborough County, these areas include Thonotosassa, Fish Hawk, Apollo Beach, Ruskin, and Sun City Center. In this case, you can use a USDA home loan to purchase a property in these places.

Income Limits

Mortgage lenders consider various factors when determining your income eligibility for a USDA loan. These factors include your qualifying, eligibility, and adjusted eligibility income.

The qualifying income is used to determine your ability to repay the loan, while your eligibility income is the total household income (including income earned by your household members). An adjusted eligibility income is the total adjusted income once deductions are made.

You must submit your qualifying income to prove you can afford the monthly loan payments. The lender will cross-check your current debt obligations and future mortgage obligations versus income to prove your eligibility.

Your lender will use the eligibility income to prove whether you meet USDA income limits. This is because the limits factor in the median household income in a particular area rather than the borrower's income.

When calculating your adjustable income, deductions such as child care and medical expenses come into play. The USDA allows mortgage lenders to subtract these deductions from your household income to determine whether you'll be left with enough money to pay for the loan.

Mediterranean Style Home showing driveway and main entrance in Florida

Loan Term, Credit Score, Down Payment, and Debt-to-Income Requirements

USDA loans come with a 30-year, fixed-rate term for low- to moderate-income borrowers. They won't be ideal if you are looking for an adjustable-rate mortgage (ARM) or a 15-year loan.

You can even take the home loan and refinance it in the next few years on terms of your choosing. However, the lender will require you to settle an origination fee and closing costs while refinancing the loan.

Credit score

It would help if you had a FICO credit score of not less than 620 when considering zero-down USDA loans. Note that mortgage lenders set minimum credit score guidelines, not the USDA.

Shopping around can get you a USDA home loan with more flexible credit score requirements. Either way, the lender will review your credit history to determine whether you make payments on time. The review will also reveal any payment defaults or delinquencies on your side.

Down Payment

One of the perks of a USDA mortgage is that you can buy a home with 100 percent financing without needing a down payment. You also have the option to use gift funds to pay for the closing expenses.

When looking to finance the closing expenses, the property's appraised value should be more than its purchase price. The good thing is that you get to become a homeowner with little to no money upfront.

Debt-to-income Ratio (DTI)

Your debt-to-income ratio will help lenders assess your creditworthiness and how balanced your budget is. It is a sum of your total monthly debts (mortgage obligations included) divided by your total monthly income. For USDA loans, you need a DTI of 41 percent to qualify.

Types of Properties to Buy with the Zero-Down USDA Mortgage

Zero-down USDA loans can only be used to buy manufactured homes, condos, fixed-uppers, and single-family homes. You can also use the financing to purchase land for new construction. However, specific rules apply when financing a property with the loan.

Properties with a safe structure, adequate wastewater system, and access to water qualify for the funding. They should also have functioning electricity and plumbing to be considered. Other requirements that are specific to the zero-down USDA mortgage include:

  • Acreage that isn't for commercial use or large enough to be subdivided
  • Property with a maximum square footage of 2,000 square feet
  • A house that is modest with a residential character
  • Property with a minimum square footage of 400 square feet

The property should undergo a thorough appraisal before financing. And if the appraiser spots any problems that go against USDA's property requirements, the purchase may fail. However, you will have up to 15 days to resolve the issues.

It's essential to reach an agreement with the seller before resolving issues identified in an appraisal. You may ask them to lower the price if you cater to the repairs. The seller may also agree to do the repairs before your mortgage closes.

To avoid conflict, have a third-party inspector check the repairs to ensure they are up to par. If not, negotiate a better deal with the seller. Only sign the paperwork once you are satisfied with the work done.

Top Things to Do in Hillsborough County

Hillsborough County is situated in the west-central part of Florida and has a population of 1,459,762 as of the 2020 census. It ranks as the most populous county outside the bubbly Miami metropolitan area and the fourth-most populous county in the sunshine state.

Its towns and cities are filled with lots of attractions and natural sceneries. Here are the top things you can do in this county:

Discover the Pinellas Trail

As a 75-mile regional trail network, the Pinellas Trail Loop offers safe, reliable, and affordable transportation. It also links residents to recreational facilities and most of the county's amenities.

Though it's still under construction, it is projected to be a continuous multi-use pathway that passes various parts of Florida. These areas include St. Petersburg, Gulfport, South Pasadena, Seminole, Largo, and Palm Harbor. The trail will also offer regional connections to Pasco and Hillsborough County trail networks.

Enjoy Breathtaking Waterfront Views at the Tampa Riverwalk

The Tampa Riverwalk is the best place to feel the warm sun and enjoy beautiful waterfront views. As a 2.6-mile trail, it crosses the Hillsborough River stretching towards the Garrison Channel. If you are in for more adventure, you can begin your journey at the Heights Market, stop at Curtis Hixon Park and end the trail at Sparkman Wharf.

You may use a scooter or bike or walk down the Tampa Riverwalk. Either way, you'll encounter numerous attractions, restaurants, and bars on the trip.

Unleash Your Passion for Ziplining at Empower Adventures

If you're into ziplining, the best place to visit is Empower Adventures, a zip line based in Oldsmar. The zip line adventure features 5 separate lines, multiple aerial challenges, and a 200-ft suspension bridge. It takes up to 2.5 hours to cruise along the entire zip line.

The guided tour lets you zip through different unique zip lines, traverse the 200-ft suspension bridge over water and test your limits over the aerial obstacle course. You can choose to finish the adventure with a fun rappel or add a Leap of Faith (a climbing challenge) to the tour.

The zip line adventure gives a bird's eye view of the Tampa Bay open waters, Mobbly Bayou Wilderness Preserve attractions, and local wildlife. You can visit the place with your family or friends and choose from different programs designed to meet your adventure goals.

Kayaking and Canoeing on the County's Waterways, Creeks, and Rivers

Kayaking and canoeing are among the best ways to explore the wild side of Hillsborough County, FL. You can rent kayaks and canoes at several county parks and enjoy leisurely paddles across many waterways, creeks, and rivers.

Consider spots such as Camp Bayou Nature Preserve, Alderman's Ford Conservation Park, and John B. Sargeant Conservation Park for kayaking and canoeing. You may also check out Edward Medard Park, Cockroach Bay Preserve, Morris Bridge Conservation Park, and Lithia Springs Conservation Park.

Engage in Horseback Riding

Hillsborough County has over 100 miles of trails best suited for horseback riding. You can turn to these trails when looking to ride your horse in tranquil yet scenic areas. Since all horseback riding spots in the county don't offer horseback riding rentals, you have to bring your horse.

For the hobby, you may consider horseback riding spots such as Town' N Country Nature Preserve, Sydney Dover Conservation Park, Lower Green Swamp Nature Preserve, and Lake Frances Nature Preserve. Other spots include Lake Dan Nature Preserve, South Edward Medard Conservation Park, and Northwest Equestrian Conservation Park.

Summing up

A zero-down USDA home loan is the perfect home financing solution if you can't afford a down payment and are looking to buy a home in a USDA-eligible area. Provided you qualify, it's vital to organize your finances, know your credit score, and gather documents to help the loan process.

Once you are ready to apply for the mortgage, a USDA-approved lender can get you prequalified for the home loan. You can then start looking at houses and settle on one that meets USDA property guidelines. All the best as you use a USDA home loan in your homeownership journey.

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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