usda home loans florida

USDA Home Loans in Florida: A Path to Rural Homeownership

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Date Posted:

May 1, 2024

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If you want to become a homeowner but don’t have the funds for a down payment, you’re not out of luck. Several government agencies offer loans to first-time home buyers and those who meet specific income criteria to make homeownership possible.

One such example is USDA home loans. These guaranteed loans offer zero down payment mortgages for homebuyers in primarily rural areas. They are available from partner lenders, and the USDA Rural Development Guaranteed Housing Loan Program guarantees them.

Interested to know more? Read on for more information about USDA home loans in Florida.

Types of USDA Loans

There are three types of U.S. Department of Agriculture (USDA) loans. Explore them below.

Loan Guarantees

Loan guarantees allow borrowers to qualify for a lower mortgage interest rate without a down payment. Borrowers also don’t need to pay for private mortgage insurance (PMI).

However, borrowers are responsible for an upfront 1% fee and an annual fee of 0.35% of the loan balance (which costs less than traditional PMI). The lender amortizes the fees across monthly payments.

The Rural Housing Service (RHS loan program) is a popular USDA loan guarantee.

Direct Loans

Direct loan programs, such as the Single Family Housing Direct Home Loan, are for low and very low-income earners who lack safe housing or cannot access a conventional mortgage loan. The income requirements vary depending on where you live.

The loans may have interest rates as low as 1% and offer terms as high as 38 years.

However, direct loans have limits. The USDA typically gives these loans for properties with a market value below the area loan limit, which also varies depending on your location. Most rural areas have a limit of around $330,000.

Home Improvement Loans & Grants

These loans are for those who want to repair or renovate their homes. The maximum loan amount is $40,000, and the maximum grant amount is $10,000. Some packages combine the two, raising the maximum to $50,000.

Loan terms are usually 20 years with a 1% interest rate.

Who Qualifies for a USDA Home Loan in Florida?

Low-to-moderate-income families qualify for USDA home loans. The borrower’s household income must not exceed 115% of the median income in the county.

Further qualification requirements include:

  • Be a U.S. citizen or permanent resident
  • Have a history of reliable income
  • Have a stable credit history and a credit score of at least 640
  • Have monthly debt payments lower than 41% of monthly income

The USDA will use other criteria to assess borrowers without a credit history or lower credit score.

Benefits & Disadvantages of a USDA Home Loan

The most significant disadvantage of the USDA loan program is that most families make more than the eligibility requirement allows.

However, some of the top benefits include:

  • Lower interest rates than conventional loans because the government assumes the risk of the loan
  • No money down
  • No requirement to pay for traditional PMI
  • Refinance options

If you want the benefits of a USDA loan without living in rural housing or are above the income limits, research the difference between USDA vs. FHA loans. Both loans offer low-interest rates, reducing your monthly mortgage payment compared to a traditional loan.

However, FHA loans have maximum loan limits, whereas USDA loan limits usually depend on your ability to repay it.

Florida USDA Home Loan Requirements

USDA home loan eligibility requirements encompass several factors. Learn more about them below.

Credit Score

Those with a credit score of 620 will get automatic approval from the GUS (Guaranteed Underwriting System). However, this doesn’t guarantee loan approval from the USDA. Having a credit score of 640 or above is best. Those with a lower credit score may still apply and seek approval through other criteria, such as a 3-5% down payment.

Additionally, borrowers cannot have a record of late payments on credit lines within the last year and no bankruptcies, foreclosures, or short sales in the last two years.

Job & Work History

Applicants must have a solid two-year work history and a reliable income. A job change within that period is acceptable as long as no unexplainable extended employment gaps exist.

Recent college graduates new to the workforce are exempt from this requirement.

Eligible Income Requirements

Because a Florida USDA loan is for low-income families, household income limits exist. For a family of 1-4 people, the total income typically cannot exceed $110,650 gross per year.

The limit is higher (up to $146,050 gross income) in more costly areas or for those with households of 5+ members.

USDA allowed deductions for the following:

  • Child care
  • Disabilities
  • Elderly care

Eligible USDA Property

The property must be a single-family home and owner-occupied primary residence in a rural area defined by USDA. Notably, existing mobile homes are not eligible.

Even though the program focuses on rural areas, many suburban locations are also eligible areas. Importantly, this does not include suburbs around the cities of:

  • Orlando
  • Miami
  • Tampa
  • Sarasota

You can view the eligibility map to find USDA homes in Florida.

Also, homebuyers can purchase the property by a variety of means, such as:

  • For sale by owner
  • Foreclosure
  • Normal real estate listing
  • Short sale

How to Get the Best USDA Mortgage Rates

Regardless of the loan type, you want to ensure your finances are in order when looking for a lender. Loan officers want to ensure you can pay back the money you borrow. Some ways to improve your finances include:

  • Gather your credit reports and address errors
  • Pay down more significant balances to improve your debt-to-income (DTI) ratio
  • Save for a small down payment, even though it’s not required, to get a better interest rate

Once your finances are sound, you should compare rates between various lenders to find the best one. You can also research programs for first-time home buyers, which offer down payment and closing cost assistance.

Find Your USDA Home Loans in Florida

USDA home loans in Florida could be an excellent way for you and your family to own a home in one of the state’s more rural areas.

If you’re ready to start, apply now for a USDA loan from The Associates Home Loan of Florida. We’re an NMLS-licensed agency with plenty of mortgage loan options that fit the needs of all types of borrowers!

Still have questions about USDA loans or other mortgage types? Call or email us and leave your contact information so we can respond and provide you with the information you need.

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