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

When purchasing a home in Florida, one of the biggest hurdles you are likely to contend with is raising the down payment. After all, Florida is known to have one of the most competitive real estate markets anywhere in the U.S so property prices can be pretty steep.

There are various government and conventional mortgages with minimal down payment requirements. For instance, FHA and HFA loans typically require at least 3.5% down payments. However, you must have an impressive credit score of at least 580 to be approved for these home loans.

But what if there was a way for you to secure a mortgage loan without paying any down payment? You can do that, thanks to the United States Department of Agriculture (USDA) Loan Program. This government-backed housing initiative is tailored to low and medium-income earners looking to purchase homes in areas designated as "rural."

Unlike other government and conventional loans such as FHA AND HFA, USDA loans do not require any down payment. More than that, they have highly flexible qualification requirements, making them accessible to a larger demographic.

In this post, we'll have an in-depth look at this loan program to help you decide whether it is worth it. Read on to learn more about the USDA loan program and how you can obtain one in Orange County, Florida.

Overview Of USDA Loans

USDA loans, commonly referred to as rural development loans, are zero-down payment mortgages intended to help people in rural and suburban regions purchase homes. Since they have low mortgage rates and don't require mortgage insurance, they are typically less expensive than FHA or conventional loans.

As long as they fulfill the minimal income and credit standards, first-time and repeat buyers are eligible for these loans. However, properties acquired with USDA loans must be in rural regions and serve as the owners' principal residence. The USDA typically determines whether an area is rural or not based on its local population. This has led to the common misconception that prospective homebuyers who live close to large cities or other populated areas are inherently ineligible for this kind of home financing. However, this isn't the case.

Despite being within a few miles of large cities, many suburban regions are considered rural. Therefore, even if you reside in a region with a large population, you may still be eligible for a USDA loan. It is worth bearing in mind that USDA loans are the most widely accessible zero-down payment mortgages available to prospective homebuyers in the U.S. The only other home loan program that offers zero down payment mortgages is the VA program which is strictly open to active military personnel and veterans.

Unlike VA loans, restricted to active-duty military personnel and veterans, USDA loans are accessible to first-time homeowners from all backgrounds. The property's location is the most critical factor in determining eligibility (whether it is considered rural by the USDA). In addition, the potential buyer must have a household income that is less than 115 percent of the median income in the region and intend to live in the home as their primary residence.

A set of costs are associated with a USDA loan, much like an FHA loan. However, unlike FHA loans, which also carry mortgage insurance, USDA loans do not charge the exact costs. Applicants approved for USDA loans are generally required to pay a one-time fee of 1% of their loan amount. This is not intended to be paid in cash; instead, it will be added to the amount of their outstanding loan as out-of-pocket closing cost payments. However, borrowers also have the option to pay the cost in total upfront if they wish to do so.

In addition to the upfront charge, borrowers must pay a small monthly fee to help defray the costs of the USDA loan program. This monthly payment is equal to 0.35% of the total loan amount.

That said, the overall cost of a USDA loan is considerably lower than FHA and most conventional loans, so if you're seeking to use one to purchase your first house, don't let the aforementioned monthly costs deter you. The fact that there is no down payment required to access this loan, and you're only required to pay minimal mortgage insurance means you will ultimately pay less on this mortgage than you would on other types of loans.

It is important to note that the USDA does not directly offer most USDA loans. Instead, most USDA loans are available as mortgages offered by conventional lenders like banks. However, these loans are backed by the USDA, which means that in the event the borrower defaults, the federal government covers a portion of the mortgage. This is why lenders are usually willing to offer favorable qualifying conditions for obtaining USDA loans compared to traditional mortgages.

Types Of USDA Loans

There are three main types of USDA loans that you can qualify for. Here is a breakdown of each of these loans:

Guaranteed USDA Loans

The USDA works in partnership with local lenders to provide loans with guarantees. Guaranteed implies that if you default on the loan, the USDA will insure a part of the mortgage. As a result, these lenders frequently feel at ease extending modest lending terms to low-income people with bad credit.

Borrowers with low or moderate incomes are typically good candidates for these loans. Household income typically includes the combined incomes of the applicant of the loan and those of every adult member of their household whether or not they cosign on loan. To qualify for a guaranteed USDA loan, your adjusted household income must not be higher than 115 percent of the median family income in the chosen rural region you desire to reside in.

Direct USDA Loans

Unlike guaranteed USDA loans that mortgage lenders approved by the USDA offer, direct loans are offered directly by the USDA. These loans are tailored for low and medium-income earners who can't access any other type of home financing. To qualify for this loan, your income must equal or exceed the threshold set for the area where you wish to buy a home.

USDA Home Improvement Loans

These loans offer financial support to low-income homeowners who want to improve or repair their homes. Depending on your circumstances, the USDA might offer you grants you don't need to pay back.

Coastal Homes in Florida

How To Obtain A USDA Zero Morgage Loan

You must satisfy several basic eligibility requirements to be approved for a USDA loan. Here is a quick rundown of the minimal requirements you must meet to qualify for the USDA loan:

  • You must be a citizen or legal resident of the U.S
  • You must show your creditworthiness and have a minimum credit score of 640
  • You need to have a stable and reliable income
  • You need to prove your ability to repay the mortgage with no late payments
  • You must have an adjustable household income that is less than or equal to 115% of the average median income of the area you live in
  • You must prove intent to live in the property as your primary residence

In addition to these basic requirements, your lender will use several guidelines and criteria to evaluate your application and decide whether you qualify for the USDA loan. These include:

Credit Requirement

To qualify for a USDA loan, you must demonstrate that you have a consistent and stable source of income and a solid credit history demonstrating your ability and resolve to repay the loan.

Although there is no minimum credit criterion to qualify for a USDA loan, the USDA automated underwriting system will automatically consider you qualified if your credit score is 640 or above. If your credit score is below 640, you may still be eligible for a USDA loan. Still, since your application must be underwritten manually, you may be subject to additional scrutiny and perhaps stricter eligibility requirements.

Income Requirement

As highlighted earlier, your total household income should not exceed the income limit in the area you live to be eligible for a USDA loan. This income limit criterion is a threshold for qualifying applicants for this loan. USDA income loan limits are typically set at 15% above the area's average median income. In other words, the combined incomes of every adult household member must not surpass your area's USDA income limits.

The loan income limit for 1- 4 member households is $91,900, whereas the limit for 5 - 8 member households is $121,300.

DTI Requirement

You must have a DTI of 41 percent or less to be eligible for a USDA loan. In other words, you shouldn't spend more than 41% of your monthly salary on debt repayment. If your DTI ratio is higher than 41%, you may still be eligible for a USDA loan, but depending on your lender, you may be subject to stricter lending guidelines.

Location Requirement

As highlighted before, the USDA loan program is designed to help prospective homeowners in rural areas buy a home. Fortunately, the USDA's definition of rural is broad, and many suburbs are included.

The USDA defines "rural" as any open land that is not a part of an urban region. Given this broad definition, loans for rural development are available for more than 97 percent of the country's territory.

Property Type Requirement

As said previously, the primary purpose of the USDA loan program is to enable low and moderate-income families to have safe and pleasant homes to live in. So, if you qualify for the loan, you can use it to purchase a new home or refinance a property.

To meet this objective, the USDA has set several property requirements to protect homebuyers and lenders. Here is a rundown of the USDA's property requirements:

  • An applicant must use the home as their primary residence
  • The home must have adequate utilities such as water and waste disposal
  • The site where the home is located should have direct access to a street, road, or driveway and
  • The USDA loan cannot be used to purchase properties for business.

With that being said, here are some of the property types that are admissible under the USDA loan program:

  • Townhouses
  • Condos
  • Manufactured homes
  • New construction homes

Top Outdoor Activities and Attractions In Orange County, Florida

Nestled in central Florida, Orange County is the fifth most populous county in the Sunshine State, with a population of 1,429,908. Its county seat is the city of Orlando, famous for its theme parks, ecotourism, and many other attractions.

If you are planning to settle in Orange County, Florida, here are some of the best outdoor activities and attractions you should make a point of checking out:

Walt Disney World

With more than 50 million visitors every year, Walt Disney World is not only the most popular attraction in Orlando but also the most visited holiday destination worldwide. The large complex comprises four main parks, each providing a unique experience. While Epcot gives a glimpse at several nations worldwide, visitors to Magic Kingdom can experience fairy tales coming to life. Hollywood Studios preserves the glitz and romance of the silver screen, and Animal Kingdom allows you up-close interactions with exotic creatures.

In addition to these four main parks, Disney World, Orlando also has two water parks and Disney Springs, where visitors can dine and enjoy entertainment without having to buy tickets.

Florida Manatee Adventure

The ideal time to see manatees in Central Florida is during the winter. These warm-blooded creatures huddle together in freshwater springs, consistently maintained at 72 degrees Fahrenheit when the weather is chilly and the water temperature falls below 68 degrees Fahrenheit.

Blue Springs State Park

Blue Springs State Park, situated north of Orlando, is one of Florida's most important winter refuges for manatees. It currently houses more than 500 manatees, a remarkable increase in the manatee population over the past couple of years. Visitors can go on a guided river boat tour, trek the 4.5-mile Pine Island Trail, or hire a canoe or kayak to explore the river and see manatees. A playground, several picnic areas, a gift store, and a concession stand are also available.

Homosassa Springs Wildlife State Park

This park makes for excellent day trip excursions if you want an excellent manatee viewing experience. Manatees can be observed from the park's underwater "fishbowl" observatory or a pavilion overlooking Blue Water, where wild manatees gather before entering the spring.

Additionally, various daily activities are provided to enlighten visitors about manatees and the park's function as a rehabilitation facility for sick, wounded, and orphaned manatees. Along with manatees, the park is home to other wildlife, including the endangered Florida panther, black bears, bobcats, and Key deers.

Manatee Springs State Park

This spring is a two-hour trip from Orlando, but it lives up to its name, with manatees migrating from the Suwannee River into the spring region throughout the winter. Viewing manatees is possible along the boardwalk that connects the spring to the river, as well as along several of the nature paths. The park also has about 8 km of hiking paths. There is a playground for children, canoe and kayak rentals, bicycle rentals, and campsites.

Kennedy Space Center

Whether you're an enthusiast of space travel or want to view some of humanity's most remarkable technical feats, the Kennedy Space Center is a must-see. From displays on the origins of spaceflight to opportunities to participate in simulated launches, the Kennedy Space Center has something for everyone. It's also a terrific way to learn more about the individuals and organizations in charge of space exploration.

Some of the must-see attractions at the Kennedy Space Center include:

  • Apollo/Saturn V Center - The Race to the Moon
  • Space Shuttle Atlantis
  • Shuttle Launch Experience
  • Heroes and Legends
  • IMAX Theater
  • Kennedy Space Center Bus Tour - Lift Off!
  • The Rocket Gardens

A Final Word

The home purchase process is fraught with financial hurdles such as down payments, which can make owning a home pretty daunting. However, thanks to government-backed home financing programs such as the USDA loan program, home ownership is now more attainable than ever before. Apply today to take advantage of this zero-down payment loan and make your goal of homeownership a reality.

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