Even When They ALL Say You Can’t..Yes You Can!
I get this question quite a bit, probably because I’m in Arizona right? And a pool is a great way to keep cool in our fairly hot summers.
But a lot of lenders will just say NO when it comes to using a USDA loan to buy a home with a swimming pool. They probably shy away because a property with an in ground swimming pool not only has to get the local Rural Development office to approve the Guarantee in order to get a USDA Loan, but they also have to get what’s known as a POOL WAIVER from the NATIONAL Rural Development office.
Sounds like a lot of extra work, doesn’t it?
Which Is The Better Loan, The USDA Loan or The FHA Loan?
Well I do quite a bit of both and for the majority of people the USDA loan will be a much better financial move for buyers in Arizona, and here’s why.
FHA has a down payment requirement, and it is currently at 3.5% of the purchase price. The USDA Loan does not require any sort of down payment at all. So right there, you get to keep that 3.5% down payment in your bank account; that is if you even have it in the first place, right?
FHA also requires a monthly mortgage insurance payment. That amount that FHA requires is 0.9 percent of the loan amount. That will give you the annual payment, so just divide it by 12 for the monthly amount.
What’s The Maximum Loan Size For a USDA Loan in Arizona?
You’ll be happy to know that the Arizona USDA Loan does not have a maximum loan size, which may be another advantage USDA has over it’s FHA counterpart.
The maximum loan size you can get will actually be determined by your qualifying repayment income.
Here is a simple 10 step process that you can use to ESTIMATE the maximum USDA Loan size you might qualify for. Today’s post is pretty detailed and all about math, so you may need to review it a couple times.
Does The USDA Loan Ignore Your Spouses Bad Credit?
More people would be looking at buying a home in Arizona with the Zero Down Payment USDA Loan if they were not held back by their spouses bad credit. There are lots of reasons why one spouse may have pretty decent credit and the other may have some bad credit dings; especially in our current economy.
These are called Spouse Only Loans and the USDA Loan does allow them. It looks ONLY at the credit report history of the borrowing spouse and does NOT even look at the credit history for the non-purchasing spouse. So if YOUR credit qualifies and your spouse has a questionable credit report, you have the option of not including your spouse on the loan.
Can you get a Zero Down USDA Loan if you don’t have credit?
Now that is another really good question.
People looking to buy a home with a USDA Loan who do not have traditional credit histories can still qualify.
Since credit history is such a large part of getting any type of loan approved, what we need to do in a case where someone does not have a credit history is to… build a credit history.
The USDA Loan does specifically state that a non traditional credit report cannot be used to enhance bad credit or a poor payment history.
Get out of school and get a zero down USDA Loan
There are quite a bit of people who would be able to buy a great home here in Arizona with a USDA Loan if they could just buy without having the 2 year history of earning employment.
And the biggest issue with that is because lenders rely on the last 2 years to determine employment and income stability. Without that 2 year history, there is nothing determine that, is there?
Well, actually the USDA Loan will allow someone to buy even without that 2 year employment history as long as they are a recent graduate from college, a trade school or even high school.
So how much will you need for closing a USDA Loan?
With most loans you would need to bring in some cash to closing in order to cover the closing costs and the down payment. The USDA loan works a little differently and in MOST cases you can get a portion or even most of your earnest money deposit refunded back to you at closing.
Here’s why..
You see the USDA Loan bases its loan amount on 103.5% of the appraised value. And typically the appraised value is slightly higher than the purchase price. This allows us to roll the closing costs into the loan and sometimes increase the loan amount just enough so that you can get your earnest money deposit back at closing.
Understanding how the USDA Loan looks at Bankruptcy
A bankruptcy does have a substantial impact on your credit and your ability to get a new USDA Loan to buy a house.
A bankruptcy is defined as a federally authorized procedure by which a debtor is relieved of total liability for its debts by making court-approved arrangements for their partial repayment. Now there are two types of bankruptcies that apply to individuals and the USDA Loan treats them both differently.
Credit Score Optimization Tips for the USDA Loan Program
With lender’s continuing to tighten their guidelines, it is more important than ever to know how to optimize your credit score for getting a USDA Loan here in Arizona. There are five components that make up your credit score, let’s take a look at them really quickly.
They are, in order of importance:
- Your Payment History, which includes things like late payments, collections, on time payments, bankruptcies and such. Keeping a good payment history is not only important for your credit score but also important for simply qualifying for the USDA Loan.
How Student Loans Impact USDA Loan Qualifying
When people are looking at getting an Arizona Home Loan whether it is a USDA Loan or FHA Loan who have existing student loans, they need to be aware of how those student loans will impact their qualifying. The USDA Loan Program is very popular among recent graduates, and a couple reasons are because not only is there not a down payment requirement but it is the simplest home loan to get.
Because you don’t need to fork out a ton of cash to get into the USDA Loan Program it has gotten VERY popular over the last few years.
