(Mar 25, 2023)
However, you have to meet specific income and credit requirements. The US Department of Agriculture rolls them out to target first-time and repeat borrowers.
The eligibility requirements for USDA mortgages are less strict compared to conventional loans. And in this guide, you will understand what it takes to get a zero-down mortgage in Pinellas County.
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Pinellas County, Florida.
What is a USDA Zero-Down Loan?
USDA zero-down mortgages are government-backed home loans targeting low and moderate-income homebuyers. Though they are meant for rural development, USDA loans come in handy when buying a property in some suburban regions. You can only use the loan to finance a home in a USDA qualifying location.
With the government backing, the loans are approved by private mortgage lenders to borrowers who can’t get a conventional loan due to the high down payment and income requirements. You can count on them to start your homeownership journey in a rural or suburban community. The mortgage can also empower you to buy properties and invest in your area of residence.
One thing that makes this mortgage attractive is the 100 percent financing option. With this option, you get the total cash needed to buy a home if you struggle to raise the down payment. You can also get it if your income allows you to make monthly mortgage payments comfortably.
However, the home must be your primary residence to qualify for the loan. USDA only considers properties like approved condo units and manufactured homes for financing. Other properties include one-unit single-family residences and planned unit developments (PUD).
Advantages of Getting a USDA Home Loan
A USDA-guaranteed loan allows you to get low-interest rates without needing a down payment. The mortgage insurance premiums are also affordable. With that said, here are the perks of this type of home loan:
Competitive interest rates
Mortgage lenders usually impose an interest rate on loans to cushion the risk of originating the loans. The government cushions this risk with a USDA loan, allowing them to charge low-interest rates. A lower rate translates to lower monthly mortgage payments and less interest paid in the course of a loan.
Zero Down Payment Requirement
Unlike conventional loan programs that impose a 20 percent down payment, the USDA loan program doesn’t charge any. Not paying a down payment can help you save lots of cash upfront when buying a home.
With the zero down payment condition, the government, through a private lender, will shoulder the entire cost of your loan. It’s a good idea to purchase a property in a lucrative housing market.
Lower Mortgage Insurance Premiums
Low to zero down payment loans come with mortgage insurance. This insurance policy protects private mortgage lenders if you default on payments.
Conventional loan programs require you to pay PMI (private mortgage insurance) premiums until you have 20 percent equity in the home. Consequently, the FHA charges an upfront and ongoing MIP (mortgage insurance premium) over the life of the loan. Though VA-backed mortgages don’t require a MIP, you have to pay a funding fee (a percentage of the home’s purchase price).
Like FHA and conventional loans, USDA mortgages require a yearly MIP and an upfront Guarantee Fee. However, their mortgage insurance rates are lower than other loans. As a result, choosing a USDA loan could yield substantial mortgage insurance savings.
Available for Different Property Types
USDA home loans are meant to finance properties situated in USD-designated areas. These properties include fixer-uppers, single-family homes, manufactured homes, condos, and land used to build a new construction home.
However, you can’t use the loan to buy a vacation or investment property. Multi-unit properties are also not approved for USDA funding, even if you intend to live in one of the units.
Gift Funds Allowed
Once enrolled in the USDA loan program, you can use an assistance program or gift money to pay the closing costs. You may also use them to cover the down payment if you put money down before the purchase. You won’t have to fill out paperwork or wait to be approved to get the down payment assistance.
A mortgage gift fund is any money received to help you purchase a home. Your finances will be thoroughly reviewed to determine if you are worth the gift fund.
What are the Income Limits for the Zero-Down Mortgage?
Since USDA zero-down loans specifically target low and moderate-income homebuyers, your income should be within certain limits to qualify. Three different types of income are reviewed to verify your income eligibility. These types include adjusted eligibility income, eligibility income, and qualifying income.
Use USDA’s income eligibility calculator to check your loan income limit. Here’s a breakdown of the three types of income reviewed in the USDA loan process:
Qualifying Income
Your qualifying income is the total amount of money you earn every month. Private mortgage lenders use it to verify your ability to afford mortgage payments. They usually weigh these earnings against the loan amount you requested.
The lender will ask you for documentation that proves your income, which encompasses base income, overtime, commission earnings, or bonus. You need to prove that your commissions, bonuses, or overtime (if you have any) are your consistent income sources. Lenders want to know that these sources will generate money after closing the home.
Eligibility Income
The eligibility income encompasses the entire household income. Your lender will use this amount to verify if you meet your area’s USDA income limits. You have to provide the records for all household members.
Adjusted Eligibility Income
You can qualify for a USDA home loan when your gross household income exceeds the income limit. However, the USDA will mandate you to take deductions to consider you in the loan program. The following deductions will be made when lenders calculate your adjusted eligibility income.
- 100 percent of childcare expenses
- Medical expenses that are over 3 percent of your household income if you are elderly or have a disabled household member
- $400 if you are a borrower aged 62 and older
- $480 per disabled adult or minor child
Credit Score and Debt-to-Income Ratio Requirements
Mortgage lenders pay close attention to credit scores when verifying your eligibility for a USDA home loan. Though there’s no base credit score requirement, most lenders will require you to have a credit score of not less than 640. A higher credit score can improve your chances of getting approved and qualify you for a lower interest rate.
Expect the lenders to thoroughly review your credit report to ensure that you are a creditworthy borrower. It’s, therefore, essential to inquire about your three credit reports from the country’s top credit reporting agencies before submitting your loan application. Take time correcting any errors and disputing false accounts on the reports since they may lower your loan approval chances.
Like with other government-backed mortgages, shopping around will get you a lender with more flexible credit requirements. You also get to compare mortgage quotes to get the overall best deal and most competitive mortgage rate.
Debt-to-Income Ratio Requirements
A debt-to-income ratio usually reflects the total monthly debt obligations divided by the total monthly income. Your DTI ratio should be 41 percent or lower if you want to apply for a zero-down USDA loan.
Pay off any outstanding debts before considering a USDA home loan if your DTI ratio is above 41 percent. You can also get approved for the loan with a high DTI ratio. However, lenders must ensure that other aspects of your mortgage application (including credit score and savings) are convincing enough.
Loan Limits for the Zero-Down USDA Mortgage
You’re likely not to have any stated loan limits for your zero-down USDA mortgage. Though most USDA home loans don’t have set loan limits, Direct USDA loans (which make up a small part of the loans) do. Your lender will assess your creditworthiness and ability to make monthly mortgage payments when setting a loan limit.
Loan Limits for Different Types of USDA Loan Programs
The USDA caters to low- to moderate-income borrowers looking to buy properties in rural areas with two loan programs. They include the USDA Guaranteed Loan Program and USDA Direct Loan Program. The loan limits will depend on the program you are enrolled in.
You can get a USDA Guaranteed loan from mortgage lenders, credit unions, or private banks if your income is 115 percent of your area’s median income. The USDA will insure this loan and require you to apply for it through a private lender. USDA Guaranteed mortgages have no loan limits.
On the other hand, USDA Direct loans target very low and low-income borrowers. You may qualify for one if you make less than 50 to 80 percent of your area’s median income. As you apply through the USDA, certain loan limits apply.
Unlike USDA Guaranteed loans that are readily available, USDA Direct loans are less widely available. The loan limits for the Direct Loan program include:
- Up to $970,800 for a property located in a high-cost area
- $336,500 for properties located in most parts of the country.
Will You Have to Incur Private Mortgage Insurance (PMI)?
USDA loans come with a mortgage insurance requirement (also referred to as the USDA annual fee) that you should meet. The annual fee is different from Private Mortgage Insurance, which is common in conventional loan programs that require you to make a 20 percent down payment. USDA mortgage insurance rates are way lower than PMI rates, making the monthly mortgage payments affordable.
The USDA instituted mortgage insurance on its home loans to protect itself against loan defaults for the same reason conventional loan lenders charge PMI. For a conventional loan, you can request your lender cancel the PMI once you have 20 percent equity in your home. The PMI requirement will be automatically waived once you reach 22 percent home equity.
Unlike PMI, the USDA MIP lasts for the life of your home loan. It won’t be waived when you make a higher down payment or attain a certain percentage of equity in your home.
Thanks to the lower mortgage insurance premiums, expect lower monthly payments on a USDA loan compared to other types of home loans. The monthly mortgage payments will be based on the amount borrowed, the home’s purchase price, and the interest rate.
Top Outdoor Activities in Pinellas County
Pinellas County is a tremendous recreational hub as a highly-populated area (with over 900,000) residents on the west coast of the sunshine state. It’s part of the Tampa-St Petersburg-Clearwater metro area and boasts numerous tourist attractions, including museums, boat tours, quaint downtowns, nature preserves, and white sandy beaches. Here are the top outdoor activities to do in Pinellas County:
Cruise Through The Pinellas Trail
The Fred Marquis Pinellas Trail is one of Florida’s most unique and popular urban pathways. It starts from St. Petersburg, heading north to Tarpon Springs. It also goes further to the Pasco County line, covering 50 miles.
As a 75-mile loop spreading through Pinellas County, the Pinellas Trail lets you enjoy views of the residential neighborhoods, scenic coastal areas, and parks. The trail got named from a former county administrator (Fred Marquis), who championed its early construction. It is a keynote facility for health and transportation on the west coast of Florida.
Play Disc Golf in Pinellas Park
Ranking at number 26 in the list of best disc golf destinations in Florida, Pinellas Park boasts 2 disc golf courses. One of these courses has more than 18 holes and a store selling disc golf gear. You can also find disc golf stores nearby to engage in this fun, challenging, and relaxing game.
Playing disc golf at Pinellas Park is a great way to connect with family and friends. You may also use this opportunity to network with other people, stay fit and teach beginners.
Ziplining at TreeUmph
TreeUmph is a great place to climb, swing, and adventure through the trees living in Pinellas County. The facility has more than 10 football fields with challenging terrain and hosts numerous aerial adventure games, ziplining included. Through these aerial adventure games, you can defy gravity, let out your wild side and have the time of your life.
Get in sync with all that nature offers at TreeUmph in your ziplining adventures. The place offers a great way to enjoy some unique attractions in the sunshine state with friends and family.
Check out the Brooker Creek Preserve
If you are a nature lover inhabiting Pinellas County, you’d probably want to visit Brooker Creek Preserve, the largest wilderness area in the county. The preserve boasts 5 miles of trails that take you through various natural habitats, including pine Flatwoods, oak hammocks, and forested wetlands. On top of it all, the surroundings are super quiet if you want to rejuvenate in nature while a little isolated.
The Brooker Creek Reserve is also a protected zone for the Brooker Creek Watershed, a diverse ecosystem. It features nearly 8,700 acres of forested land and is safe for kids and adults.
Take a Picturesque Journey to Anclote Key Island
Anclote Key Island is a beautiful remote island lying 3 miles off the Tarpon Springs coast. You can access the island through a boat ride and enjoy picturesque sceneries along the way. On the journey, expect to encounter many dolphins playing in the water.
Most of Anclote Key is situated within Pasco County, while the southern part lies in Pinellas County. Anclote Key is home to Anclote Keys Light, a magnificent lighthouse with a square pyramidal shape. On the island, you’ll enjoy views of sandy beaches, coastal pine Flatwoods, mangrove wetlands, and many shorebirds.
Summing up
Since they require no money down and boast lower mortgage insurance rates, USDA loans are among the best loan programs you can use to buy a home. You may consider one if you want to purchase a property in a rural or suburban area approved by the USDA for financing. The eligibility requirements are less demanding compared to those of conventional loans.
(Mar 25, 2023)
