All About USDA Home Loans in Delaware
How to Purchase a Home in Delaware with a USDA home loan.
There are many good reasons to choose a USDA home loan. The most appealing is that you do not need to have a down payment. The loan covers the entire purchase price of the home. Also, the seller can pay most all of your transfer taxes, closing costs and pre paid taxes and insurance.
Another great reason to choose USDA is that the upfront funding fee is 1%. (This is vs. FHA at 1.75% and VA at 2.15 for first time use.) Additionally the monthly mortgage insurance premium is based on a factor of .350% vs. .850% for FHA.
The 100% Guaranteed Rural Housing home loan is available in a lot of areas of Delaware. All of Sussex County, most of Kent County and some of New Castle County are eligible. The link to find out if a particular property is in an eligible area is http://eligibilty.sc.egov.usda.gov.
The income limits on USDA loans are: $86,850 for 1-4 person households in Kent and Sussex Counties, $114,650 for 5-8 person households in those counties. For New Castle County, the income limits are $103,650 for 1-4 person household and $136,800 for a 5-8 person household.
Income from the entire household is included.
The main purpose of these loans is to have an affordable loan product for buyers that don’t have sufficient assets for a down payment on other loans.
Some lenders require a 640 and above credit score and some have a 620 minimum credit score requirement.
Loans can be done after a bankruptcy has been discharged for 36 months. On Chapter 13 bankruptcies, the borrower must have completed at least 12 on time payments of the agreement.
The debt to income ratio used for USDA loans normally require a 29% front end and 41% back end. (If you take the total housing payment and divide by the gross monthly income you get the front end. The back end is the total debt payments divided by the monthly income.)
The seller of the home can pay up to 6% of the purchase price toward the buyer’s closing costs. This is a huge deal. It helps the overall financial outlay for the buyer.
Gift funds from a family member can be used for closing costs.
Some inspections are required. A termite/wood destroying insect inspection is required when the sales contract calls for one. This inspection is also required if the appraiser or home inspector notes it on their report or the State law requires one.
The quality of the water must meet State and local standards.
Septic systems will be checked to make sure they do not have any evidence of failure. They must meet HUD guide lines and/or State codes.
An appraisal is required. If the appraisal value is higher than the purchase price, the borrower can increase their loan amount to accommodate some closing costs.
To sum up, there are many advantages to using a USDA loan to purchase your home. No down payment, the seller can pay most all of the closing costs, the upfront funding fee and monthly mortgage insurance are low.
To find out if you qualify for a USDA home loan in Delaware, contact a licensed loan originator.
JoAnn Moore, President, The Mortgage Market of Delaware, LLC, Georgetown Delaware. 302.855.1306, 302.236.1229.