USDA Rural Development Loans are one of the toughest loans to originate and require the use of a seasoned and experienced Loan Officer. To determine if a Loan Officer has the skill set necessary to get a USDA loan to settlement can often be determined right away by asking some basic questions that a USDA Loan Pro will have no challenge in answering.
These questions aren't designed to stump a Loan Officer on a technicality but rather determine if the Loan Officer holding themselves as USDA proficient, can really walk the walk and talk the talk. Here are five simple questions your lender should absolutely be able to answer correctly. if they don't know the answers . . . run . . . don't walk . . . run . . . to a lender that does!
- What is the dollar amount of the "Commitment Fee" based on a specific purchase price? At best the inexperienced USDA Loan Officers will state 3.5% and take the purchase price and multiple that dollar by 3.5%. Guess what this is wrong. USDA has their own math and the calculation is as follows: Purchase Price/.965 - Purchase Price. So on a $100,000 purchase price the commitment fee is $3,626, not $3,500. To quickly calculate the USDA Commitment Fee USDARuralLoan.com has an online calculator tool that will determine the upfront fees as well as the cash savings offered by the USDA Loan Program Vs. a comparable FHA Loan Program.
- What two qualifying parameters exist only with a USDA Loan vs. any other loan program on the market? There are maximum income qualifying and geographic restrictions. USDA requires that the borrowers household income NOT exceed county specific guidelines and the house has to be in a Rural Housing Approved designated area.
- What are the two primary benefits a USDA Loan offers vs. a FHA Loan? USDA Loans don't require a down payment or monthly mortgage insurance.
- Will a USDA Loan take longer to get approved than a comparable low-down payment loan such as FHA? Yes. The USDA Loan must first be fully approved by the Underwriter without conditions and sent to the U.S. Department of Agriculture where their in-house Underwriter must also sign off on the loan. On average the time required for the USDA Underwriter to approve the loan will be about two weeks after receiving the file from the Lenders Underwriter. In total it is not unreasonable for a USDA Loan to take up to six weeks for a loan to be completely approved.
- What is the name of USDA's Automated Underwriting System (AUS)? USDA AUS is named GUS and is an online approval engine that is used by Underwriters to quickly approve a loan request. Unlike FHA's and VA's AUS, which are embedded within FannieMae and FreddieMac's AUS, GUS is a standalone program. This means that most Loan Officers don't have access to it. So if a pre-approval or pre-qualification letter indicates that the loan was approved by GUS make sure that the Loan Officer actually submitted the file to an Underwriter.
More than likely, this is one of the largest and most important financial transaction you will ever make. You might only need a mortgage loan four or five times you entire life . . . but rest assured all I do is originate mortgage loans. It's my profession and passion.
To learn more about your USDA Loan Financing options call using the USDA Rural Loan Program go to USDARuralLoan.com or email info@USDARuralLoan.com. I specialize in USDA Loans and Renovation Loan Financing. I am approved to lend nationwide and can be reached at (866) 747-2882.