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USDA Loans in Miami-Dade County, Florida: Learn How to Obtain a Zero Down Mortgage

Miami-Dade County is the most populous region in the southeastern United States. Commonly known as the "Gateway to Latin America," Miami-Dade has grown into a county defined by elegance and charm. With an impressive housing selection, some of the lowest crime rates, and an excellent school system, it's easy to see why this county is one of the best places to live in Florida.

If you're looking to buy a home in this vibrant, fun county, here's how you can obtain a zero-down mortgage.


What is a USDA Loan?

One of the biggest hassles of buying a house is saving up for the down payment. But if you're planning to move to a suburban or rural area, such as Miami-Dade County, you may be able to skip paying the down payment with a USDA loan.

So, what is a USDA loan?

A USDA (U.S. Department of Agriculture) loan is a government-backed loan program that helps low- and moderate-income borrowers living in suburban and rural parts of the country become homeowners.

The government backing on these loans enables private lenders to approve individuals who might not qualify for a conventional loan program due to low income. USDA loans aim to nurture growth and development in suburban and rural communities and offer homeownership options in underserved areas.

Most first-time homebuyers who struggle to raise the initial down payment prefer USDA loans due to the 100% financing option. However, you don't have to be a first-time homebuyer to get a USDA mortgage loan.


So, What Are the USDA Loan Qualifications?

To be eligible for a USDA mortgage loan, you must meet the basic eligibility requirements set by the government, which cover:

  • Income
  • Credit
  • Home location
  • Property usage

Each factor plays a pivotal role in meeting the USDA's mission of offering safe and sanitary housing to low and moderate-income families.

Below, we'll cover the critical eligibility requirements in great detail.


USDA Loan Location Requirements

USDA loans are designed to boost development in suburban and rural areas by helping those in these places buy residential homes. This program only applies in qualifying suburban and rural areas, and eligible locations fall into the following categories:

  • Places that are not located in the Metropolitan Statistical Area (MSA) and where there's a population of about 20,000 or less

  • Locations where there's a population of up to 10,000 in rural areas or open country

  • Areas that lack mortgage loan opportunities for low- and moderate-income borrowers

Generally, properties, metropolitan cities, and counties aren't eligible for USDA loans. But the good news is that 97% of the land mass in the U.S. meet the location criteria, meaning you're highly likely to find a USDA-eligible town in Miami-Dade county. Consider looking up your address on the USDA home loan map to know whether it meets the program's guidelines.


USDA Loan Property Requirements

Aside from meeting the location eligibility requirements, your house must conform to USDA mortgage loan property standards. A USDA loan-eligible single-family property can include townhomes, condos, modular homes, detached (stand-alone) properties, and manufactured homes. Unlike government-backed mortgage programs, such as VA loans and FHA, you can't purchase a multifamily property with a USDA loan.

Your home should also be:

  • Primary residence - Investment properties or second homes are not USDA-eligible

  • Safe structure with adequate access to wastewater and water systems; offer safe vehicle and pedestrian access to the property, have sufficient structural integrity, provide adequate living space, heat, hot water, and sewage disposal, have functioning plumbing and electricity, and at least one bathroom with a shower or bathtub and a toilet

  • Modest residential property of not more than 2,000 square feet. It should be at least 400 square feet

It's also worth noting that your home shouldn't have acreage large enough to be turned into a commercial property.


USDA Property Appraisals

Once you make an offer on a home and the seller accepts it, your lender will schedule a real estate appraisal with a government-approved appraiser. Here, the appraiser will review the property to ensure it meets all the USDA property condition guidelines. If they flag any area that falls short of the property standards, you may have to make repairs before the loan can close. At this point, you'll either negotiate with the seller on who'll pay for the repairs and renovations or back out of the agreement and look for another home.

The appraiser will also evaluate comparable properties nearby to calculate the home's fair market value. Remember that your lender won't approve the zero-down mortgage if the seller's asking price is higher than the home's appraised value. In this case, the seller would need to reduce the price for the loan to proceed, or you'll have to pay the difference in cash for the loan to close.


USDA Loan Income Requirements

USDA loans are specifically designed to help low- and moderate-income homebuyers. So, only individuals whose total earnings fall below or at the income requirements will be eligible.

Generally, lenders look at four different calculations to determine a borrower's income eligibility:

  • Adjusted Annual Household Income
  • USDA Qualifying Income
  • Repayment Income
  • Annual Household Income

At a minimum, the USDA loan requires you to have a stable, provable income and likely to continue. Lenders usually verify income by requesting recent pay stubs and two years of income tax returns to look for consistent employment.

Annual household income is the overall projected income of all adult members in your household. It's vital to note that every adult's income will count towards the household limit irrespective of whether or not they're part of the loan.

On the other hand, adjusted annual income is your total annual income minus acceptable deductions. It's usually used to determine whether you meet the program's income restrictions.


USDA Loans and Income Limits

The government limits the adjusted gross income a specific household brings in during the loan application process. This ensures that only the intended low- to moderate-income borrowers benefit from the loan program.

The general USDA income limits are:

  • 5-8 member household: $136,600
  • 1-4 member household: $103,500

These limits vary by household size and location to adjust for regional differences. For instance, if you want to buy a home in Miami-Dade County, your adjustable household income should equal to or less than 115% of the county's median household income. USDA will also compare the regional median to your total qualifying income to determine eligibility.


USDA Repayment Income

There's a big difference between USDA repayment and qualifying income. Qualifying income ensures you meet income requirements, whereas repayment income reflects your ability to repay the loan.

Your lender will assess your creditworthiness by calculating your DTI (debt-to-income ratio). The USDA set a standard 41% ratio for USDA loans, meaning you shouldn't spend more than 41% of your monthly income on debts. However, getting a USDA loan with a higher DTI (41%+) is still possible if other aspects of your application, such as savings and credit score, are vital.

But remember that a DTI higher than 41% can mean stricter lending requirements. If you have a high DTI, consider paying your outstanding debt before applying for USDA loans.


USDA Loan Credit Requirements

Besides showing stable and dependent income, your credit history must demonstrate the ability and willingness to repay your loan. Generally, there's no minimum credit requirement for USDA loans. However, borrowers with a FICO score of 640 or higher qualify for the USDA's automated underwriting system.

On the other hand, applicants below the 640 mark are subjected to manual underwriting, which means more stringent guidelines.

To determine creditworthiness, lenders review items like:

  • Repayment patterns
  • Credit score
  • Length of credit history
  • Credit utilization

If you lack an established credit, you may still be eligible for a zero-down mortgage. Policies on this can vary greatly depending on the lender and other factors. Still, you'll need credit verification from alternate sources like utility, insurance, and rent payments.


Aerial shot of luxury Miami homes on water in Florida


Types of USDA Mortgage Loans

There are two types of rural housing mortgage loans under the USDA umbrella:

  • Single-Family Housing Direct Loan
  • Single-Family Housing Guaranteed Loan

Guaranteed USDA Loans

The USDA guarantees 90% of a mortgage loan amount for qualified borrowers who obtain a mortgage through the bank or other commercial lenders. This makes it practical for many homebuyers to get approvals for 30-year, fixed-rate loans with no down payment.

You can use a Guaranteed Loan to purchase, construct, renovate, repair, or relocate your primary residence. Unlike USDA Direct Loans, Guaranteed Loans require applicants to pay a mortgage guarantee fee of 1% of the total amount borrowed. Your lender can clear this fee. You must also pay an annual fee of 0.35% of the total mortgage loan amount.

Individual lenders determine the rates they're willing to offer on these loans, so it's vital to shop around before opting for a specific lender.


Direct USDA Loans

The Single-Family Housing Direct Loan comes straight from the government, so you can't apply for them through private lenders. They're specially designed for very low- and low-income individuals who don't have safe, decent, and sanitary houses and can't get an affordable loan from other sources.

The standard loan term is 33 years, but it can be extended for as long as 38 years. As of November 2021, the interest rate was 2.5%, but after subsidies, your rate can be as low as 1%.


What Makes USDA Loans So Appealing?

While financial hurdles, such as down payments and closing costs, can make home-buying seem impossible for most first-time homebuyers, the USDA loan is here to help rural and suburban homebuyers realize their homeownership dreams. This government-backed mortgage comes with several perks unheard of with other loan programs. They include:


Zero Down Payment

Both repeat and first-time homebuyers can qualify for this zero-down mortgage, but for most first-time borrowers, their biggest challenge is getting enough funds for a down payment. This program allows you to achieve 100% financing, and using a $0 down payment to buy your home is undoubtedly the most notable benefit of using USDA loans. Similarly, homebuyers must pay a minimum of 5% for a conventional loan and a 3.5% down payment for FHA loans.


Low Monthly Private Mortgage Insurance (PMI)

PMI is a type of insurance that homebuyers might be required to purchase as a condition of conventional mortgage loans. Unlike most types of insurance, this policy protects a lender's investment in the house, not the person buying the insurance. Most lenders need PMI when a borrower makes a low down payment (less than 20%) of the home's buying price.

While many programs attract these premiums, the advantage of using USDA loans is that their rates are the lowest and won't change based on your down payment. For instance, if you want to buy a home in the rural parts of Miami-Dade County and apply for a USDA loan, you should expect to pay a PMI annual fee of 0.35%, depending on your loan's remaining principal balance. What's more, any upfront required by your lender can be rolled into the property financing to enable you to close without putting down a dime.


Lower Interest Rates

Most conventional lenders use various factors, such as the borrower's credit score and loan-to-value ratio, to determine mortgage rates. Fortunately, USDA loans offer a lower-than-market interest rate that doesn't vary based on your down payment or credit score.


Closing Cost Assistance

USDA loan closing costs are similar to other highly regarded loan programs in Miami-Dade County. They range between 3-6% of the purchase price. So, if your mortgage loan is worth $200,000, the closing costs should be approximately 6,000 to $12,000.

However, the advantage of using USDA loans is that they allow the seller to pay a specific percentage of the closing costs or the whole amount. You can also ask your lender to include the closing costs in your mortgage loan or use gift funds to pay for them.


Flexible Credit Guidelines

Unlike other mortgage alternatives, USDA loans allow some homebuyers with limited or blemished credit histories to qualify for home financing. So, if you have no credit or non-traditional credit, you may be eligible for the zero-down mortgage if you are willing to repay your debts with proof using utilities, rent, cell phone bills, etc.


Top Outdoor Activities in Miami-Dade County, Florida

If you're planning to use your zero-down mortgage to buy a home in Miami-Dade County, you might wonder whether it's the right decision. Well, there's a lot to love about this economic, cultural, and financial hub in South Florida. From museums, boutique shopping, theme parks, and art show to outdoor marketplaces, professional sports, and cultural districts, there's something for every homebuyer in the Magic City.

To help you figure out if this is the correct county to call home, we've compiled the top outdoor activities in Miami-Dade County.


Everglades Tours

Also known as the River of Grass, the Everglades is a unique ecosystem of salt and freshwater wetlands. It's home to several tour operators, offering memorable sailing and boating excursions. If you want to explore the saltwater portion of the Everglades, the Ten Thousand Islands Cruise has got you covered. Bald eagles, roseate spoonbills, dolphins, and manatees will likely be seen here.

On the other hand, the Mangrove Wilderness Tour will take you through the shallow and brackish portion of the Everglades. Here, you'll have a good chance of seeing raccoons, mangrove fox squirrels, bobcats, alligators, and a variety of bird life.


Private Boat Tours in the Ocean

From Biscayne Bay to the Atlantic Ocean, Miami-Dade County is centered on the water. This makes it a prime destination if you want to get out on the crystal blue oceans on a Miami private boat tour. By buying a home in this region, you'll get to sail calm waters, soak up the sun while exploring popular locations on a cruise, zip through the Everglades, and even dive right into the depths of the under-ocean yourself.


Kayaking

If you love aquatic activities, then Miami-Dade County is the place to be. With Miami's unique marine ecosystem and calm waters, kayaking is a natural way of enjoying a day in Mother Nature.

Some of the best places to start include Homestead, Coral Gables, and Sunny Isles Beach. Key Biscayne is also a haven for water sports, and while at this place, you don't want to miss visiting Crandon Park. This park boasts many ecosystems, including mangroves, seagrass beds, dunes, and coastal hardwood hammocks. Are you feeling adventurous? Consider joining a sea kayak adventure as you paddle your kayak through the mangrove forest from Crandon Marina.


Golfing

With sunny skies and balmy temperatures year-round, not to mention an enviable collection of over 20 public and private courses, Miami-Dade County offers golf lovers an opportunity to perfect their play. Whether you want to rent or pack your clubs, you can't afford to miss the chance to tee off on some of Florida's scenic and most challenging courses.

If you're a golfer, you'll be glad to know that you don't need to pay a membership fee to play in Miami's public courses. For instance, Miami Beach Golf Club has welcomed out-of-towners to the famous narrow fairways on its 18-hole course since the 1990s. Its location just a few minutes from South Beach is ideal for a beach-and-bunker day.

Another perfect alternative is the Crandon Golf Course. It's famous for its scenic holes and sand traps that offer sweeping views of Miami's skyline and overlook Biscayne Bay.


Parasailing

With gentle takeoffs and dry landings, you'll find parasailing in Miami's seas and oceans a thrilling yet safe way of having actual Miami-Dade water and air adventure. To benefit the most from your adventure, go parasailing off the coast of the Magic City. Soar above the emerald blue waters while enjoying a breathtaking bird's eye view of the city.


Ready to Commit to Moving to Miami-Dade County, FL?

The USDA loan program annually helps thousands of low- and moderate-income families finance their homes. Aside from making homeownership a reality for individuals who may otherwise find it improbable, the initiative also aims to stimulate the economy in rural and suburban America.

So, if buying a home in Miami-Dade County is your lifelong dream, USDA loans can be crucial and manageable solutions to securing your dream home. Get in touch with USDA and see how one of their loan housing programs can be of assistance to you.

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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