A Guide to USDA Loans

With over eight thousand miles of coastline, relatively snow-free winters, and no state income tax, it’s easy to see why Florida is the fastest-growing state in the country and the third most populous. And though metro areas like Miami, Jacksonville, Tampa, and Orlando make up most of the population, 30 of our 67 counties are considered rural.

For those who appreciate the slower pace of life and generous amounts of elbow room, a government-backed U.S. Department of Agriculture (USDA) loan may be the Florida mortgage option you’re looking for. But first, let’s look at a USDA loan and who may qualify.

What is a Rural Area?

While “rural” may conjure up thoughts of farmlands or vast miles of wooded acreage, the U.S. Census Bureau defines rural as “any area that’s not urban.” Though somewhat vague, this definition typically applies to any metro area with 50,000 people or more at the urban core.

What that means for homebuyers is plenty of home options in areas that aren’t all that remote. Many of these homes are in small towns throughout Florida and even some suburbs near larger cities.

What is a USDA Loan?

The USDA single-family housing guaranteed loan program began in 1991, with the goal of creating homeownership opportunities by helping approved lenders offer “100 percent-financed, no-money-down mortgages to eligible low and moderate-income applicants.”

Though the USDA may fund a small number of loans directly, the USDA guaranteed loan program works with a group of approved lenders rather than issuing loans themselves. These lenders then work directly with homebuyers to review applications and issue housing loans. To ensure lenders continue to offer these loans, the USDA loan program guarantees the loan, which minimizes the risk to lenders.

How Do I Qualify for a USDA Loan?

To qualify for a USDA loan, the property you want to finance must be in a qualified rural area eligible for USDA loans. In addition, applicants must meet the below criteria:

• You must be a U.S. citizen, a U.S. national, or what the USDA describes as a “qualified alien.”
• Your income cannot exceed 115% of the median household income in the area where the home is located. These median income limits can change annually and vary based on the town in which you want to buy.
• Like FHA loans, the USDA single-family housing guaranteed loan program can only be used to finance the purchase, refinance or improvement of your primary residence. In other words, you can’t use a USDA loan to buy an investment property.

Unlike conventional loans, USDA loans don’t have a minimum credit requirement. Nevertheless, the program states applicants are expected to be willing and able to handle and manage debt. Additional details and requirements on the USDA loan program can be found on the USDA’s Rural Development website.

How Can I Apply for a USDA Loan?

The first step in applying for a USDA loan is to speak with one of the USDA’s active lenders. Applying for a USDA loan is almost identical to applying for a traditional mortgage.

Before you start searching for a rural-eligible primary residence, getting pre-qualified or pre-approved with a lender specializing in USDA loans is a good idea. During this process, the lender will verify your identity and review your financial situation to determine your eligibility for a loan. At this time, you will often be asked to provide a government-issued identification, along with recent pay stubs, tax return documents, bank statements and other documentation.

With your pre-approval, you can start touring homes in USDA-approved areas (USDA rural development). After you find the right property and the seller accepts your offer, the next step is to make a formal USDA-loan application. At this stage, the lender should already have the necessary information but may want to verify some final details. In some cases, the lender might also request additional documentation.

Is a USDA Loan Right for You?

Living in a rural area has many benefits, such as a more affordable cost of living, easy access to the great outdoors, and a slower, quieter lifestyle. USDA loans are an excellent option for low- and moderate-income borrowers seeking an affordable home purchase in an eligible rural area. For qualified applicants, a USDA loan is one of the only mortgage options that doesn’t require a down payment. In addition, USDA loans don’t have a minimum credit score.

So, to explore your USDA loan options, stop by your local Seacoast Bank branch today. As a USDA-approved lender, the Seacoast mortgage team is here to help guide you through the home-buying process.