How to Get 100% Financing with San Diego USDA Rural Housing Loans
Many people don’t know about these San Diego USDA mortgage loans, but as a very experienced San Diego mortgage broker, I’m going to explain how the program works and what you need to know to qualify.
The program is officially called the USDA Rural Development Guaranteed Housing Loan program and also has other acronyms such as Section 502 loans, USDA loans or simply, Rural Housing Loans.
What is a San Diego USDA Loan?
First off, USDA loans are insured by the U.S Department of Agriculture and allows you to obtain up to 100% financing to buy a home and even in some cases you can finance the closing costs. These loans can be used by either repeat buyers or first-time home buyers and are very similar to the regular loans which are obtained through Fannie Mae or Freddie Mac.
USDA loans are the same as regular loans except you can buy a home with nothing down up to a $417,000 loan amount. The USDA rural loan is available as a 30 year fixed rate mortgage only. Interest rates are comparable to other 30 year fixed rate mortgages for other standard San Diego mortgages.
However there are qualifications that must be met and certain provisions required. Both you and the home you are buying must meet these requirements to qualify.
San Diego USDA Loan Program Summary
First, you must be “without adequate housing” which means you do currently own a home or live in an adequate home.
Second, you can only qualify if you are unable to qualify for a conventional San Diego mortgage loan.
Qualifying for a conventional loan means you do not have to obtain PMI (Private Mortgage Insurance) because you are able to meet the following criteria:
- You have a 20 percent down payment;
- You can pay all closing costs out of pocket;
- Your total debt ratio is 36 percent or less; USDA allows up to 47.99%
- Your debt ratio for PITI (which means principal, interest, taxes and insurance) is 28 percent or less; USDA allows up to 35.99%
- You have a good credit history and have kept current payments up to date
- You have not experienced a foreclosure or a bankruptcy over the previous 36 months
What Are The San Diego USDA Rural Eligiblity Requirements?
The USDA requires that the home you are buying must meet certain rural eligibility requirements. Don’t despair because they are quite liberal in how they interpret the term “rural.” Here is a link to be able to look up specific areas of San Diego County or property addresses.
Below are the areas of San Diego County to generally work with the USDA loan program.
- Valley Center
- Pine Valley
Also, the home you are buying must be used as a “Primary Residence” and cannot be a vacation property, nor can you use the property as an investment property. You cannot use the loan for a “working farm” because the loan must be for residential property only.
If you want to get a San Diego Mortgage Rate quote, then CLICK HERE. If you need more information about San Diego Rural Housing Loans or have some questions about other available San Diego mortgage loans, you can call me at 619 – 312 – 0612.
Eligible Borrower Requirements
In order to be able to use the USDA loan program, you as the borrower must meet these requirements:
- You must be a U. S. citizen
- Permanent resident aliens must submit the following: – Submit INS/CIS Form I-551, “Alien Registration Receipt Card” (a.k.a. green card).
- Married borrowers applying without their spouse (non-purchasing spouse (NPS)): The income of the non-purchasing spouse must not only be verified but included in the household income calculation to determine if household is “income eligible.” However, the non-purchasing spouse’s income will not be counted toward repayment/qualifying income.
Eligible San Diego Property Types
There are certain types of property which qualify for the San Diego USDA program including the following types of homes:
- One-unit detached or attached properties
- Planned unit development (PUDs)
- Properties that come with in-ground swimming pools. Properties with swimming pools may be approved under certain circumstances. However, the loan value used to determine maximum guaranteed loan amount will exclude any value contributed by the pool.
Income Limits for San Diego
There are also total household income limits which must be followed. This includes the income of anyone over 18 years of age and is included as the total income of the household whether they are named on the mortgage or not.
The maximum total annual gross household income levels are shown as follows:
1-4 People 5-8 People
Credit Score Requirements
There are no minimum credit score but the general cut off point is 640. If you have a lower credit score you will have to provide an explanation why it is lower. If you have no credit score other alternatives concerning payment history may be considered.
USDA Guarantee Fee Requirements
The USDA program does require a Guarantee Fee, which is a little like mortgage insurance. However, you will not have to provide any cash up front as they will be attached to the loan at closing. As of Oct 1, 2012 the guarantee fees were as follows:
- Home purchase – 2.00% upfront fee paid at closing, based on the loan size
- Home refinance – 2.00% upfront fee paid at closing, based on the loan size
- For all loans, 0.40% annual fee, based on the remaining principal balance
How Financial Gifts Can Be Used
Gifts and grants from relatives, non-profit, government or community agencies are allowed towards down-payment, closing costs and prepaid items. A gift letter is required.
This program does not require the borrower to have financial reserves, but they do serve as a compensating factor if credit scores are low or other aspects of the file are week.
- You must use a San Diego lender that provides USDA rural loans such as myself
- You can negotiate with the seller to pay for your closing costs.
- You are eligible if you are self-employed or just recently returned to work and are a W-2 employee
Contact Shanne Sleder of The Mortgage Planners to Apply or for More Information
I have been a San Diego mortgage broker for the past 12 years and provide you with all the help and information you need for a USDA Rural Housing Loan, along with Jumbo Loans, VA Loan, or other low down payment options.
To get you started right away and find out the latest interest rates, you can get a free quote by clicking HERE.
If you want to speak with me direct, call me at 619 – 312 – 0612 and I will help you with your San Diego Mortgage Loan questions or application.