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USDA Loan Process & Timeline
If you are buying a home in a rural area and have a low-to-moderate household income, a USDA loan may be right for you. These mortgage loans backed by the United States Department of Agriculture offer many unique benefits to help you afford your first home. Such advantages include low-interest rates, lower mortgage insurance (PMI), and up to 100% financing. That’s right, no down payment!
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We recommend you check out the rest of the articles in this series for additional information on USDA loans:
Part 1: What is a USDA Home Loan?
Part 2: Income Limits
Part 3: Credit Score
Part 4: Property & Location Eligibility
Today, we want to walk you through the overall process and timeline for USDA loans. Here is a simple step-by-step guide.
See if You Are Eligible
USDA loans are not available to everyone. They are designated for “rural” areas and can only be used for primary residences. The borrower must also meet certain income and credit score requirements. Please review Parts 2-4 of our USDA loans series for more detailed eligibility information.
Apply with a USDA-Approved Lender
Next, you should talk to a USDA-approved lender. Not all mortgage lenders offer USDA loans. The Moreira Team is here to help with all your USDA loan needs. Be prepared to submit required information and documentation, including:
- Personal Information (contact info, SSN, etc.)
- Credit Score
- Household Income
- Current Assets & Debts
Loan Pre-Approval
Within about 3-7 days of submitting your loan application, you should hear from your lender if you are pre-approved for a USDA loan or not. If you are pre-approved, you will receive a pre-approval letter that will let you know how much you qualify for and other important details. Pre-approval does not imply final approval when the mortgage loan is ultimately processed during the home purchase, but it will give you a significant head-start. It will also help make your purchase offers look much more attractive while confirming your eligibility for a USDA loan.
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Home Search
Next comes the home search. You can be searching before or while your USDA loan is being pre-approved, but it’s best not to get too far ahead of the process. The pre-approval will show you how much you can afford and the pre-approval letter will be very important to include when you make a purchase offer on a home you wish to buy. And, as mentioned already, the home itself must be in a USDA-eligible area. Be sure you are searching in a market where you can use your USDA loan!
Appraisal & Underwriting
Once you have an offer accepted and are under contract, the lender will perform the final underwriting process. This will include a home appraisal to make sure the property is worthy of a mortgage loan in the requested amount. You can usually expect this process to take about a week.
USDA Approval
After the lender has done their paperwork, they will send the final mortgage loan documentation to the regional USDA office. They will need to authorize the loan and confirm the eligibility of you and the property you are buying. This final approval from the USDA may take a few days or up to a few weeks, so it is important to allow for extra time during this crucial stage.
Closing
Once the loan is approved by your lender and the USDA, all the final documents are sent to the escrow company. You will sign the paperwork and officially close the sale. The loan will be finalized and the house will be yours, usually within 1-2 weeks of getting the final approval from the USDA.
For the most part, getting a USDA loan is a similar process and timeline as any mortgage loan. You just have to make sure you and the property are satisfying the eligibility requirements, and then you can expect the final loan approval process to take a little longer because of the extra step where the USDA reviews the documentation.
If you have any questions about the USDA loan process or timeline, or if you are ready to apply for your mortgage loan, contact Moreira Team today!
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