(Mar 20, 2023)
Due to their attractive features, USDA zero-down loans may seem too good to be true. However, as long as you are eligible (meet income and location requirements), you can get approved immediately. Once approved, you’ll have to consult with a participating mortgage lender to determine how much you qualify for.
There’s a lot to consider as you decide whether a USDA mortgage is right for you when living in Taylor County, Florida. Read on for guidance on obtaining this zero-down mortgage and getting the most out of it.
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Taylor County, Florida.
Understanding USDA Loans
As zero percent down payment home loans with government backing, a USDA mortgage can allow you to buy a residential property in an eligible rural or suburban area. You must be a low- or moderate-income homebuyer to be considered for this program.
With USDA loans, there are no set maximum home purchase prices. You get low-interest mortgage rates with fixed-rate terms and a zero down payment requirement. There’s no need to be a first-time homebuyer to get approved for this type of loan.
The US Department of Agriculture established the USDA loan program to target homebuyers in rural and suburban areas having trouble raising down payments. Little will be required of you when applying for home financing.
Generally, USDA loans work best if your credit profile isn’t great and saving is quite a challenge. They allow you to skip down payments in out-of-pocket costs and save cash. Though lenders require a 620 credit score, getting the loan is still possible if your income suggests you can afford the monthly payments.
Benefits of Getting a USDA Zero-Down Loan in Taylor County, Florida
It’s no secret that USDA loans are better suited for you if raising a down payment is an issue. You can also take the loan with limited income when looking to buy a home in an eligible rural or suburban area. Expect the following perks when enrolled in this loan program:
Zero Percent Down Payment Required
Unlike other home loans that require you to make a down payment of 20 percent, USDA mortgages boast a zero down payment requirement. You can save a lot of money in the long run with this incentive. It will also shorten your timeline for buying a home.
Perfect Financing for Multiple Property Types
Taking a USDA loan can help you finance the purchase of a single-family home, fixer-upper, condo, or manufactured home. The mortgage can also be handy when buying land to build a new construction home.
However, you can’t finance an investment property or vacation home with this loan. The same applies to a multi-unit property, even if you’d like to occupy one unit.
It can be used with Gift Funds and Assistance Programs
USDA mortgages are compatible with gift funds and most mortgage assistance programs. In this case, you can use these financial incentives to cover your down payment costs (if you decide to make one) and closing costs. You won’t have to go through rigorous procedures to qualify for the assistance program.
Relatively Low-Interest Rates
The interest rates are one of the loan features that make conventional mortgages unattractive. While the lenders want to minimize the risk of giving out loans, the high-interest rates can worsen your income if your income is limited.
You should therefore turn to a USDA home loan to enjoy relatively low-interest rates. Even better, you won’t have to make any down payment and enjoy less interest paid and lower monthly payments.
Low Mortgage Insurance Premiums
When checking out conventional mortgages, you’d probably encounter term mortgage insurance. Conventional home loans charge private mortgage insurance (PMI) premiums, while USDA ones have upfront and annual mortgage insurance premiums (MIP). You’ll have to pay the MIP throughout the home even if you have a large percentage of equity in your home.
Mortgage insurance premiums charged on USDA mortgages are low compared to PMI premiums. With low MIP rates, USDA loans can help you save money on mortgage insurance.
USDA Loan Rates
You should always consider the effective rate of the USDA home loan you are taking. An effective rate refers to the base mortgage rate added to MIP for a particular loan.
USDA loans boast a loan rate of 0.35 percent of the borrowed amount to cover the annual mortgage insurance premiums. Their base rates are usually lower than government-backed loan programs such as VA and FHA.
What Effect Do Your Finances Have on Your Interest Rate?
USDA-approved mortgage lenders look at various factors when you apply for a Direct Loan or Guaranteed Loan. These factors include credit score, debt-to-income ratio (DTI), and income.
As for your credit score, yours should be at least 620 to qualify for a USDA mortgage. Your DTI limit will be determined by an Automated Underwriting System that lenders use. You must also prove that your income is sufficient to handle monthly mortgage payments.
You stand a chance of getting favorable USDA loan rates if you have a low DTI, excellent credit score, and strong credit profile. A weaker credit profile, high DTI, unstable employment, and low credit score may result in a high loan rate.
Scoring a Competitive Interest Rate
Thanks to the USDA backing these loans, a participating lender can offer you an affordable interest rate on a 30-year home loan. You won’t need to make a substantial down payment or have a solid financial profile. However, to qualify for a reasonable rate on your loan, work on the following:
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Your credit history (with on-time payments on debt accounts, loans, and credit cards)
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Your credit score (by making on-time payments and keeping your balances low)
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Lowering your DTI (by paying off any pending loans)
- Saving up for the down payment (though it isn’t required, making a 3 to 5 percent down payment can help you get a low-interest rate
USDA Loan Limits
One fact about most USDA loans is that they don’t have a set loan limit. This condition applies to the Single-Family Guaranteed Loan that forms a large part of all USDA mortgages. Expect USDA Direct loans to come with loan limits.
A Direct Loan is a government-issued mortgage targeting potential homebuyers with very low and low incomes. It can suit you if your income exceeds 50 to 80 percent of your area’s median income. Its limits include a maximum of $970,800 if the area has a high cost of living and $336,500 nationwide.
On the other hand, Guaranteed Loans are offered by private banks, mortgage lenders, and credit unions to borrowers with low to moderate earnings. Your income must be less than 115 percent of your area’s median income to be considered under this loan program.
What Does the Zero Down Payment Requirement Entail?
USDA zero-down loans were created to encourage economic development in eligible rural and suburban areas. They achieve this goal by allowing eligible homebuyers to finance the purchase of properties in these locations. You can count on them to accelerate your homeownership journey.
Since everything with the loan doesn’t come for free, you must meet specific eligibility criteria. The zero down payment incentive will come into play if the following are true:
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You are a US Citizen, borrower with permanent residence, or foreigner who is ineligible for a conventional home loan
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The property is being purchased in an Eligible USDA area
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You meet various USDA loan income limits
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The property will be your primary residence
- Eligible property including fixer-uppers, single-family homes, condos, manufactured homes, and land for new construction
Income Limits for the USDA Zero-Down Loan
Your adjusted household income should be lower than your area’s median income to be considered for home financing under the USDA loan program. The program has certain income limits since the loans target borrowers who can’t qualify for other types of mortgages. In this case, the set income limit is 115 percent of your area’s median income.
Your household income is the sum of income earned by adult household members on your property. The USDA will not approve your mortgage if your adjusted household income exceeds this limit. On the other hand, your adjusted household income is the total household income remaining after deductions such as childcare expenses and medical expenses are taken.
Do USDA Loans Have a PMI Requirement?
Expect to pay mortgage insurance premiums (MIP) when getting a zero percent USDA loan. The MIP is equivalent to PMI (private mortgage insurance) on conventional home loans. However, expect it to drop every year that you make mortgage payments.
The USDA charges an annual fee as part of the MIP to cushion them against potential defaults or delinquencies. Since they insure the loans, they wouldn’t want to make losses in default cases.
MIP charged on USDA loans comes in the form of a yearly 0.35 percent fee and a one-time upfront guarantee fee of 1 percent. Instead of paying an annual fee at the end of the year, you can have it split into 1/12 installments. In this case, you will have it included in your monthly loan payments.
You can also include the 1 percent upfront amount in your mortgage. Lenders allow this exception even if the loan amount exceeds the home’s appraised value.
Applying, Getting Approved, and Closing on the House
Before starting the USDA loan process, you must review your finances. Review your monthly expenses, debts, and credit score to see if you can afford the monthly loan payment. Once you’re done with this procedure, stick to the following steps:
Get Pre-qualified with a Participating Lender
In the pre-qualification stage, expect the participating lender to estimate the maximum loan amount you can borrow. Your financial information will also be verified, so choose a lender that understands this loan process to save time.
After getting pre-qualified, you will receive a pre-qualification letter that can help you do a home search. Note that sellers and real estate agents only consider buyers with pre-qualification loan letters in the housing market.
Submit an Attractive Offer
Once you locate a property of your liking, check on the USDA eligibility map whether it is situated in a suitable location.
If the property is in a qualifying area, proceed to submit an offer to the seller. Your offer should be compelling enough to improve your chances of closing on the property. If the offer goes through, your lender will have the home appraised to see whether the sale price is close to that of properties nearby.
Provide Additional Underwriting Verification
Be cooperative when the lender asks for additional documents such as bank statements, employment records, and tax forms. These documents will help them verify whether you are in a position to afford the mortgage.
Wait for an Official USDA Approval
The USDA must give their stamp of approval on your mortgage for you to use it to finance a home purchase. Once you meet the lender’s requirements and get approved, it will take time before the loan gets signed off by the USDA. Check the rural development site run by the USDA to know the status of your loan application.
Schedule Convenient Closing and Funding Dates
Your lender can help you schedule a convenient closing date, where you get to sign the loan documents. They will also suggest a funding date, possibly two days after closing. Expect money to be disbursed to your account on the funding date, helping you realize your homeownership dream.
The Best Fun Outdoor Activities to Do in Taylor County, Florida
Situated in the northern part of the Sunshine State, Taylor County, Florida, offers plenty of festive and fun activities for your entertainment. The county boasts a natural coastline, relaxing rivers, white sandy beaches, and a warm tropical climate. Here are five fun activities you may consider engaging in during your stay in the county:
Fishing
Taylor County has nearly 60 miles of natural coastline, creeks, numerous streams, and four rivers suited for fishing. The county attracts anglers from different parts of the country looking to catch sheepshead, grouper, redfish, and sea trout.
You can go fishing at the Econfina River for the best trout on Florida’s west coast. The river is also home to redfish, mullet, and Spanish mackerel.
Kayaking and Canoeing
Explore the beautiful coastal sceneries Taylor County offers by a kayak or canoe. For your convenience, there are lots of paddling trails nearby. Carry along a waterproof camera and binoculars to capture the abundant colorful wildflowers and wildlife lying along the waterways.
The Aculla River Paddling Trail is a great place to start. It features multiple access points for thrilling paddling experiences.
You can also take your passion for kayaking and canoeing to the Big Bend Saltwater Paddling Trail. The trail offers excellent fishing and wildlife viewing opportunities.
Scalloping
Did you know that Taylor County is among the few places in Florida where you can catch your scallops? There are plenty of scalloping opportunities along Steinhatchee, Hagen’s Cove, and Heaton beach. The catch is that this activity requires few resources or tools to get started.
The scallop season in Taylor County runs from June 16 to September 10. The resources needed for this activity are a boat, a fishing license, and a diver’s flag.
Bird Watching
Take your love for birdwatching to the Hickory Mound Impoundment, which is home to Mississippi kites, ospreys, and bald eagles. You can also spot several seaside sparrows along Adams Beach and a variety of shorebirds along Keaton Beach.
Hiking at Hagen’s Cove
Wear your best-hiking boots and visit Hagen’s Cove for exciting hiking adventures. The cove is home to diverse wildlife, grassy flats, and shallow waters.
Besides hiking, you can also participate in outdoor activities such as boating, swimming, bird watching, and fishing at Hagen’s Cove. You can also catch picturesque views of the Gulf of Mexico from an observation tower at the cove.
Summing up
USDA zero-down loans are a convenient option if you want to buy a home in an eligible rural or suburban area, but you can’t qualify for a conventional loan. With a zero percent down payment requirement on the loan, you enjoy significant cost savings, low-interest rates, and low mortgage insurance. Make the most out of a USDA mortgage today in your homeownership journey.
(Mar 20, 2023)
