4 Step Approval Process
No Money Down Home Loans
Our USDA four step approval process let’s you check your eligibility from home and get started buying your first home.
As you work through each step of the process, make sure you keep track of your answers. With the completed 4 steps you will have enough information to complete our USDA pre-qualified tool.
Step 1 - Income Eligibility
USDA is a unique program because it has an income limit. Most home loan programs like to see higher income to qualify, but not USDA.
USDA was created to serve the under-served communities of the nation. If your household income exceeds the areas median income, you will not qualify for a USDA loan. You must make below the median income limit to qualify for a USDA first time home buyer loan.
To check your income Eligibility, visit the official USDA website by clicking here. Make sure you enter your household income, not just your own. If you have a working dependent / child living in the home, his/her income must also be considered. Even if you are the only applicant, the entire household income must be considered.
If you find that your income is close to the limit, let us know. There are caveats to the income limits including the ability to subtract child care costs and other variables. When you have completed this step, make sure to write down the result. You will need this information for the USDA qualifier tool.
Step 2 - Property Eligibility
USDA is a loan program structured to serve those looking to purchase a home in rural communities. If you think you might live in an area that is too heavily populated, don’t worry. 95% of the country qualifies for USDA mortgages.
The town population is considered so in many cases you can buy a home one street up from your preferred location and still qualify for a USDA loan. Even area of Long Island qualify for USDA financing.
To check the property Eligibility you will visit the official USDA website and confirm your desired location to purchase a home. Click here and get started. Remember, wrote down your results so you can complete the USDA qualifier tool.
If the first search does not work, expand the search are so you know where you will be able to purchase a home.
Step 3 - Check Your Credit Score
USDA has very flexible credit requirements. If your credit score is above 600 you can be approved for a USDA home loan. While credit scores as low as 600 do require some additional documentation, if your credit score is above 640, you should not have an issue getting approved as a first time home buyer. We will show you how to check your own credit score and determine your eligibility.
If your credit score is between 600 and 640 you will need to consider a fee things. First, you will most likely need to verify that you have a 12 month history of paying rent. Second, you will need to have a minimum amount of credit history. Typically you will need to have at least 2 active accounts reporting on your credit report.
If you do not have the minimum credit history you can also verify parent accounts such as a insurance bill or an electric bill in your name.
To check your credit score you will need to visit Credit Karma. Click here to be redirected now.
Credit Karma provides you with a free credit score every 7 days. The coat is that you will need to deal with their marketing. Credit Karma makes.money by partnering with lenders and allowing them to market to you from their site.
Once you have set up an account with Credit Karma, notate the higher of the two scores so you will be able to fill out the USDA loan qualifier tool.
Step 4 - Calculate Your Debt Ratio
A debt ratio is a calculation done by banks to determine how much you can afford every month. While most banks make this sound like a challenging calculation, it is actually very simple. Just follow along and you will know your debt ratio in no time.
First figure out what the applicants total monthly income is. Make sure you use the gross income amount. Gross income is the amount received before taxes or insurances are taken out. It should be the higher number on your paychecks. If you receive $300 a week, multiply $300 by 52 (52 weeks in a year) and divide that by twelve. This will tell you your gross monthly income.
If you receive monthly benefits, they are typically not taxable. In the event you receive income that is not taxed you can actually gross up your income to qualify. Pretty neat little trick to qualify for USDA!
To gross up your checks, take the amount of the monthly benefit and multiply that amount by 1.15. this will tell you how much income you can use from your monthly benefits.
Once you have calculated the applicants total monthly income, you will multiply that amount by .41. Make sure to write this amount down so you don’t forget!
Now from the previous calculation, subtract all of your current monthly debts reporting on your credit report. Don’t worry about rent, insurance, or groceries. Only subtract debts like car loans, credit cards, and student loans. If it isn’t on the credit report you don’t need to subtract it.
Pro Tip: go back to credit karma and use the reported monthly payments. Only use the accounts reporting on Credit Karma.
The final number you get is the amount you can afford every month for a housing payment. Make sure to write this down. You will need this for the loan qualifier tool.
If you have any trouble at all calculating your debt ratio, you can give anyone in our staff a call and we would be glad to walk you through it. It really is easier than it sounds.
Congratulations! You Can Complete the Loan Qualifier Tool
Now you can fill in the USDA loan qualifier and get a preliminary qualification letter. Simply fill in the answers and that’s it. You will get your letter in your inbox soon. We hope this helped make your home buying experience easier.
We make it our goal to provide free information to prospective home buyers. We believe that financial literacy is one of the most important peices if knowledge to have in the modern world. We have consulted home buyers in all 50 states and would be happy to help you on your journey to home ownership.
PlattsburghMortgage.com strives to make homeownership easy through educational resources. Our mission is to provide financial education to help grow the economies of Upstate New York and spread the dream of homeownership.
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