(Mar 25, 2023)
If you are in this category, earning a low or moderate income, we have some good news: you may be able to afford a house in one of the counties on the Nature Coast, known as Pasco County.
Pasco County is a growing city with safe neighborhoods, low living costs, and awe-inspiring sceneries. And you, too, can live here if you are eligible for a USDA home loan!
But what are USDA loans, and who’s eligible for them? This piece will answer these and many other questions.
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Pasco County, Florida.
What are USDA Loans?
As the name suggests, USDA loans are backed by the US Department of Agriculture (USDA). They are specially tailored for individuals with low to moderate-income planning to buy homes in rural areas.
What exactly are rural areas, you may ask?
Although the Census Bureau doesn’t have a specific definition of “rural,” they use this term to refer to all geographical areas that don’t belong under the “urban” category. Urban, in this case, refers to urbanized clusters (2,500-50,000 people) and urbanized areas (50,000 or more residents).
Therefore, if residing in any relevant rural area in Pasco County, Florida, is on your bucket list, a USDA loan can help you transition successfully. The home location requirements we will discuss later will cover the USDA’s definitions of rural areas in detail.
What Makes USDA Loans Worthwhile?
At this point, you likely wonder if applying for a USDA loan is a good idea. The short answer is IT IS A SPLENDID IDEA. Why?
Zero Down Payment
If you earn a low income, the first question that likely comes to mind whenever you think about buying a home is, “how will I afford the down payment?” After all, most homebuyers put down between $10,000 and $15,000 for a typical house in the US.
Lucky for you, the USDA loan program offers 100% financing with ZERO down payment. So, you don’t have to worry about scraping together enough money while purchasing a home in any rural area in Pasco County.
Lower Interest Rates
Mortgage rates have risen considerably, and experts expect more spikes in the future. That should be cause for worry considering that the average rate for a 30-year fixed mortgage is currently around 5.94%.
But don’t worry; USDA loans have much lower rates. For instance, as of June 2022, the Single-Family Housing Direct Home Loan’s interest rate was 3.00%.
There’s more: the lower-than-market interest rates associated with USDA loans don’t vary. On the contrary, conventional lenders use various factors to determine mortgage rates, including loan-to-value ratio and credit score.
Closing Cost Offers
USDA closing costs are somewhat similar to other reputable loan programs. Currently, closing costs are approximately 3-6% of the principal loan amount. So, if your mortgage is worth $150,000, the closing costs should be around $4,500 to $9,000.
However, unlike other programs, USDA home loans offer other enticing closing costs deals. First, they allow seller concessions, meaning the other party can help you cover an agreed percentage of the closing costs or the entire amount.
Moreover, you can include the closing costs in your USDA mortgage loan. That is known as rolling in your closing costs, meaning you can use USDA home loans to cover closing costs.
PMI Costs
Most loans with low down payments (less than 20%) attract private mortgage insurance (PMI) premiums. PMI protects lenders against losses arising from defaulting borrowers. On average, many programs require borrowers to pay anywhere from 0.22% to 2.25% of their mortgage to cover PMI premiums.
Fortunately, USDA loans are backed by the United States Department of Agriculture, making private mortgage insurance unnecessary. But, they have two fees: the upfront guarantee and annual fees.
The upfront guarantee fee can be less than or equal to 3.5% of the principal obligation. On the other hand, the agency allows lenders to impose annual fees that don’t exceed 0.5% of the average unpaid principal loan balance.
Refinancing
Most of us love refinancing our mortgages, and for good reasons. First and foremost, this option allows borrowers to enjoy lower monthly payments and interest rates. If you are in this category, you must hear this: you can refinance a USDA home loan!
And the conditions for refinancing a USDA loan are pretty straightforward. For instance, you should have had the mortgage for at least a year before the refinance request, and the refinanced property must be your primary residence.
USDA Loan Categories
The United States Department of Agriculture has the following types of loans for homebuyers:
Direct USDA Loans
Direct USDA loans fall under the Rural Home Loans Program (Section 502 Direct Loan Program). These loans have one sole objective: to help low-and-very-low-income borrowers purchase decent, sanitary, and safe housing in qualified rural areas.
The direct loan program primarily provides payment assistance to applicants. Payment assistance is a subsidy that lowers mortgage payments for a given period.
Eligibility criteria
According to the USDA Rural Home Loans fact sheet, borrowers eligible for direct loans must:
- Be lacking safe, sanitary, decent housing
- Be unable to meet other lender programs’ terms and conditions
- Be willing to make the properties their principal residences
- Not be debarred or suspended from participating in federal programs
Guaranteed USDA Loans
Unlike direct loans funded directly by the USDA, private lenders offer USDA-guaranteed loans, but the USDA backs them against default. Besides that, guaranteed loans help eligible borrowers to buy, construct, renovate, improve, or move their primary residences to qualified rural areas.
Eligibility Criteria
Guaranteed USDA loans don’t have many requirements. In brief, applicants must:
- Satisfy income-eligibility requirements
- Be willing to occupy their dwellings as primary residences
- Be a United Stated Citizen, Qualified Alien, or non-citizen national
USDA Home Improvement Loans
If you thought the United States Department of Agriculture does nothing more than help you afford a decent house, think again. Why? Because the USDA can also help you repair or improve your home or remove existing safety and health hazards if you are an elderly very-low-income homeowner.
Eligibility Criteria
The Section 504 Home Repair program is for homeowners who:
- Occupy the houses that need improvements or repairs
- You can’t get affordable loans elsewhere
- For grants, applicants must be 62 years or older
Who Can Apply for a USDA Home Loan in Pasco County?
Do you plan to apply for a USDA loan and buy property in Pasco County? In that case, you should be familiar with the USDA requirements for this county beforehand. Below is a breakdown of all these.
Home location requirements
USDA loans help you own a modest, decent home in an eligible rural area. That being said, the USDA definition of “rural area” is unique. You’re about to find out why.
The USDA has different categories for rural areas. The first is a locality with a maximum of 10,000 residents. But if it has between 10,001 to 20,000 people, it may still qualify as a rural area, provided it is not a central statistical area (MSA).
Lastly, if a region has more than 20,000 but less than 35,000 residents, it may qualify for USDA if it was once considered a rural area but lost that privilege in the 1990, 2000, or 2010 censuses.
Most importantly, any rural area with 10,000+ residents must also have a severe lack of mortgage credit options to qualify for USDA loans.
Only Rural Development can determine eligible and ineligible locations and properties. You can check if the area you want to live in or the property you wish to purchase qualifies by clicking on the links on the USDA website eligibility page.
Property eligibility
You can only get a home loan from the United States Department of Agriculture if the house you plan to purchase will be your principal residence, not an income house, vacation property, or even a second home. That means you must use it as your primary place of living.
In addition, the property should have functional heating and cooling system and be easily accessible from an all-weather or paved road.
Not to forget, the USDA requires the home you plan to buy to be structurally sound, have good roofing, and possess a plumbing system that can tackle waste removal effectively.
Minimum credit score
The United States Department of Agriculture doesn’t require borrowers to have a specific credit score. However, many lenders dealing with USDA-guaranteed loans only allow people with a credit score of 640 or more to apply.
Furthermore, the USDA has an automated underwriting system that approves applicants with a minimum credit score of 640. Does that mean you can’t get a USDA loan if your credit score is less than 640? Not really. You may still be eligible, but you must use the manual USDA loan underwriting system.
Other factors also increase the chances of getting a loan from USDA even with a low credit score, including high rent payments, low debt-to-income ratio, a stable or consistent employment history, and assets like cash reserves.
And suppose you can’t establish your credit score because you’ve never taken out a credit card or loan. In that case, other non-traditional tradelines may help you prove your ability to meet payment obligations. These include rent payments, utilities, auto insurance policies, educational costs, and gym memberships.
Income requirements
The USDA Rural Development has income limits for all relevant loans. The limits vary from county to county. However, the income limit for most of the United States is currently set at $103,500 for a family comprising 1-4 individuals.
You can check income eligibility for your home’s exact location from the USDA eligibility website. When you get to the web page, pick your state and county, Florida and Pasco County, respectively, then fill in all required details.
Remember, USDA uses yearly household income, projected annual income for the next year (12 months), and repayment income to calculate and determine your ability to repay loans. Plus, the department factors in the income of each adult in your household.
What do lenders need to calculate and verify your income? Paystubs, W-2s, and third-party employer verification. So make sure you have all these on standby before applying.
Is Using Your Loan to Buy a Home in Pasco County, FL, a Good Idea?
Planning to become a Pasco County homeowner? Congratulations! You are about to live in an area that allows you to revel in the following incredible activities:
Swimming
Beaches! If the first thought that comes to mind when you hear that word is “swimming,” you are in for a treat. Living in Pasco County will give you access to numerous beaches and designated swimming areas such as Anclote River Park, Hudson Beach, and Robert K. Rees Memorial Park.
Plus, most beach areas in Pasco County are safe and family-friendly. Therefore, you can take your family along and have a blast enjoying the waters and scenery.
As if that isn’t enough, Pasco County has countless lakes, including Middle Lake, Moody Lake, Lake Pasadena, Blanton Lake, and Lake Conley. Some of these have beach areas where residents can swim.
Golfing
Does a round of golf every other day or weekend sound enticing? In that case, living in Pasco County, Florida, won’t be disappointing. Why? This area has many reputable country clubs and golf courses.
State-of-the-art facilities accessible to most avid golfers in Paso County include Mainlands Golf Course and Tampa Bay Golf & Country Club. And the best thing is that out of the 30+ golf courses within the county’s boundaries, at least 18 are fully public!
Camping
Picture spending time in a tent erected outdoors, with nothing but a peaceful ambiance, fresh fish you just caught out of a nearby lake cooking over an open fire, and your camping gear. Does that sound like something you’d love to experience? If so, you can do it in Pasco County.
Pasco County’s Parks and Recreational Department has several wilderness parks that support camping, including the Jay B. Starkey Wilderness Park and Withlacoochee River Park. Most of these have camping sites with essential facilities like showers and restrooms. And if you like camping in primitive sites without modern facilities, you won’t find parks like Jay B. Starkey lacking.
Sightseeing
This world is full of interesting places; some are outside your doorstep or will be once you buy a home in Pasco County, Florida. What does that mean?
Pasco County is home to many popular attractions, ranging from water parks and aquariums to zoos and ranches. These are open to both tourists and residents. Once you choose to live here, you can pick up a bike or rent a minivan and visit all these exciting places with friends and family!
Snorkeling
Most outdoorsy folk consider snorkeling a ton of fun, and we agree. Why wouldn’t having a glimpse of the underwater world and its creatures be exhilarating? Not to forget, snorkeling is relatively easy, and it doesn’t require hard-to-find equipment.
So, would you like to snorkel? If yes, living in Pasco may be a good idea. This county has more than a couple of top-tier snorkeling locations, including the Anclote Keys, Shell Key Preserve, Egmont Key State Park, and Robert K. Rees Memorial Park.
Mountain biking
Most thrill-seekers and cyclists love mountain biking, which involves riding special bikes on different off-road trails. This sport requires speed, agility, and endurance. It’s a total body workout that any able person can engage in and gain immensely.
If you are an avid cyclist or plan to become one in your lifetime, dwelling in Pasco County won’t be a deterrence. On the contrary, it is a huge plus because this region has several top-tier biking trails, including the Serenova Tract and Hardy Trail.
How to Apply for a USDA Loan in Pasco, Florida
If you are ready to live in Pasco County and would like zero down payment USDA loans to make that possible, follow these steps:
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If you want to apply for a USDA-guaranteed loan, find an approved lender in Pasco County from the list of all approved lenders in the US. Your lender will be your point of contact for any clarifications and will help you review your eligibility.
- If you seek a direct home loan, visit the USDA’s fact sheet page and use the resource available to guide your steps.
Ready to Live in Pasco County?
If buying a home in Pasco County, Florida, is your lifelong dream, a USDA loan may help you make it a reality.
So, if a low or moderate-income prevents you from becoming a Pasco resident, rest assured you are nearly there. The only thing left is applying for a mortgage loan from the USDA Rural Development housing programs and waiting for feedback.
(Mar 25, 2023)
