Buying a home without making a down payment can be rather difficult. Most conventional loans require at least some type of down payment that ranges from 3% to as much as 20% of the home’s selling price. For a $200,000 home that can mean $6,000 to $40,000 out of your pocket! Thankfully, the Florida USDA Loan can help borrowers bypass that large expense.
Understanding Florida USDA Loans
Florida USDA Basics
USDA is the acronym for the United States Department of Agriculture. For approved borrowers, the program will ensure their mortgage loan against default. The primary qualifying factor for the USDA loan is that the home must be within a rural area as designated by the USDA.
In modern language, we think of the term rural as a home or town that is located far away from a major city. Thankfully, that is not how USDA defines the term. A Florida map provided by USDA shows that nearly every county has at least one rural area. In fact, many places just on the edge of major towns like Jacksonville, Tampa, Orlando, and Miami are designated as rural.
Florida USDA No Down Payment Requirement
The USDA states that qualified borrowers may receive a loan equal to 100% of the home’s asking price or appraised value, whichever happens to be lower. This means that a home currently worth $212,750 is selling for $205,000 then a borrower can buy the home for $205,000 and not have to pay any down payment.
This makes the Florida USDA loan one of the few ways a person can purchase a home without spending a lot of upfront money.
Florida USDA Income Limit Means NO LOAN MAXIMUM
Most loans, like conventional mortgages and FHA loans, have a maximum amount that can be loaned for one home. That is not the case with USDA. However, there are income limits for the borrowers that must be met.
The USDA income limits can be obtained by your lender. Each state has varying limits as well as differences between counties and cities. The income limit is also decided by the number of people living in the home.
It is important to understand that all of the income earned by people living in the home will be counted for the income calculations. For example, if a married couple with a teenage daughter is considering the home, it is reasonable to expect that both the husband and wife will be on the loan application. In the case of a USDA loan, if the teenage daughter has a part-time job, her income will also be included to determine if the household meets the income limits.
However, the USDA rules are not unreasonable. Particular expenses for childcare or care of elderly relatives can be deducted from the income of the household.
Florida USDA Fees
Earlier we explained that approved borrowers are not required to make a down payment on the USDA mortgage. In order to provide that guarantee, all USDA loans are required to add a funding fee at the beginning of the mortgage. The amount is currently 1% of the loan amount and it is added to the mortgage to allow borrowers to finance the fee.
There is also a yearly fee applied by USDA. This fee is currently 0.35% of the annual balance and is paid out over the course of the year. For example, if a person has a USDA loan balance of $205,000 on January 1, then they will be asked to pay $717.50 over the course of the year ($205,00 x 0.0035 = $717.50). This amount is divided by 12 and added to the monthly mortgage payment.
View current USDA Fees.
Qualifying For A Florida USDA Loan is Easier
USDA is also much easier to qualify for. People that have decent credit scores often can qualify for an FHA loan. These same people may likely qualify for the USDA program as well. This makes the home program accessible to more people.
Eligible Types of Homes in Florida
USDA offers to lend on most kinds of homes. A single-family unit, a condo, or a PUD can be considered for the loan as long as they are in a rural area. The home can be existing or a recently completed new construction home.
The home can also be for sale by owner, a bank foreclosure or it can be a short sale transaction. So long as the home is within a designated rural home and it meets the property guidelines at the time of appraisal, it should qualify for the loan.
Furthermore, all USDA loans are for owner-occupied properties. The USDA does not approve loans for investment homes or vacation properties.
Added Benefits of the Florida USDA Loan
There are other features of the Florida USDA loan that make it appealing to many potential borrowers.
- USDA does not require borrowers to attend any type of class or counseling before being approved for the loan
- The loan is available to all borrowers. First time home buyers, as well as experienced buyers, may apply for a USDA loan
- There is no prepayment penalty for USDA loans. Borrowers may pay off the loan as early as they like
- The seller of the home may pay a portion of the closing costs. Sellers are allowed to pay up to 6% of the home’s selling price in concessions.
Along with the no down payment option, the added benefits of the USDA loan make this a very attractive offer for numerous home buyers.
Along with offering a great way to purchase a home, USDA also offers a streamline refinancing option. This streamlined loan is only available to people that currently have a Florida USDA loan, but it can be quite beneficial. Here are some of the basics of the USDA Streamline Refinance program
- The borrower(s) may not have any late mortgage payments within the most recent 12 months
- The term for the new loan will be a 30 year fixed loan
- The new mortgage will include all closing costs as well as the balance of the current loan, resulting in no cash out-of-pocket for the borrower
- Borrowers will not be allowed to get cash from the refinance
- Existing USDA mortgage holders are eligible, EVEN IF their area is no longer considered rural
- Income for all borrowers will need to be verified
- No maximum amount of loan to value. This is great for people that owe more on their home than the current value and need to refinance to lower their payments.
- The new mortgage payment must be at least $50 less than the previous mortgage payment.
Summing Up The Florida USDA Loan
As you can see, the Florida USDA mortgage program is a great way to buy a home. The ability to purchase a home with average credit scores and no down payment provides the opportunity for homeownership to a wide range of consumers. Combined with the attractive interest rates that are offered on 30-year and 15-year fixed terms, the Florida USDA loan is a great fit for today’s home buyer.