World's dumbest question!

[annakathleen]

Hoping to buy a house this year. Neither hubby or I know much about the process, just what i learn on here and other similar sites. Which is alot of info at an alarming rate!!! LOL . Someone suggested a USDA guaranteed loan as an option for us. No money down approvals in the 620-640 range. Myfico score is 636 for hubby. Mine is 584 but I have just added a cc and I don't work anyway so don't anticipate being on the loan.....could be wrong??? Anyway the question is....What is a USDA guaranteed loan? I know they guarantee the loan if it defaults, BUT do we also have to go through approval processes with lenders as well as the USDA process...does the usda process itself approve us for a mortgage? What out of pocket costs are involved? downpayment? appraisals, inspections? are they stricter or more lacking in the USDA process? Sorry for so many questions....and thanks in advance for the replies! 

[Anonymous]

You will need a lender. Once you make it through lender underwriting your file will be sent to usda where it will go through their underwriting. You will have to pay for inspections and appraisal. No dowmpayment is required and you will have to be approved through lender and usda.
Hope this.helps.

[annakathleen]

So....does USDA make it easier for the lender to approve you since they are guaranteeing the loan? I guess I don't understand the benefit of using the USDA guaranteed loan?

[JM-AM]

There are two different types of USDA loans... You can do a search on boards about the differences.

The area you are looking at homes in has to be an approved area, which you can find on their site of the areas. Your income has max values you are allowed which you can also find on their site.

All loans have advantages and disadvantages according to each individual.

In your peticular case I couldnt tell you what the advantages are as I do not know all your circumstances. The biggest thing that stands out from the limited information is you wont qualify for a conventional loan, and if you did your scores as low as they are your rates would be substantially higher. Comparing to FHA you wont have the UPMIP and the monthly MIP that you must pay for at least 5 years and possibly longer until your home is at a 78%LTV. Also with FHA you have to pay 3.5% minimum down payment. USDA does have MI but it is a much smaller number compared to FHA.

What the general advantage is, will accept lower scores, rates are competitive, minimal to no down payment needed, and MI is much cheaper compared to FHA.

[MovingForward_2012]

Very good explanation. I have been wanting to learn more about the USDA process and requirements. Thanks! :-)