Hi, I just mailed my application to USDA today. I am just curious what others have been approved for. Maybe in my similar situation.
I live in Arkansas, looking to buy in Sebastian county. I make $36,857 gross yearly pay, $32,947 net. I have no rent pmts, a secured credit card that I owe $10 on and minimum pmt. of $10 monthly and a car pmt of $470. I am fairly confident of being approved for a USDA Direct loan. We are just so exited and ready to start online shopping for homes but would love to know an approximate price range to be looking for? Any input would help.
USDA approvals are based on DTI (debt-to-income ratio). The two kinds of DTI are front-end ratio and back-end ratio. Front end is housing expense (principle, interest, taxes, insurance or PITI) and back end is housing expense plus all other recurring debt. The USDA requires a debt-to-income ratio of 29/41 (0.29 front end, 0.41 back end).
For example, your Gross Income = $36,857
Divided by 12 gives your monthly gross income which is $3,071 per month
$3,071 Monthly Income x .29 = $891 allowed for housing expense
$3,071 Monthly Income x .41 = $1,259 allowed for housing expense plus recurring debt
Estimating taxes at 1.5% and insurance at $600, you should come in somewhere around $130,000. You mention "we"... keep in mind USDA uses total household income to determine elegibility, not just those on the loan. You don't mention your household size, but based on your income and location, you would need at least four people in your housefold to qualify for the Direct program. Otherwise, your income is too high. you would still qualify for the Guaranteed program though. Also be sure to check USDA's property eligibility map as parts of Sebastian County appear ineligible.
Thanks, I was hoping for more but at least you gave us a starting point. I have seen in other posts that people have received way more with around the same income. I guess they may have less monthly debt. Does anyone know if we get approved if we get our car loan refinanced for a smaller monthly pmt, would they approve us for more. We paid off over half our car loan in a year so I don't think it would hurt us financially to do so. When we first got the car we had bad credit (505 trans union). Now my trans union score is around a 630. My mid score is 640. So I'm sure we could get our pmt at least cut in half. I don't want my score to drop from the inquiry and reaging of loan. Do you think they will let us do that after loan approval to get a higher loan amt?
Sorry for lack of details. Yes we have a household size of four and my wife doesn't work. So my income is the only income in the household.
and The area inside of Sebastian county we are looking at is eligible
It's tricky to estimate. The Direct program will subsidize your interest rate to keep your housing payment at around 24% of your monthly income. So you might qualify for more, but they keep these calculations "in house". 24% of your income would give you a payment around $735. As a rough estimate, this would give you a subsidized interest rate of 2.25% which would qualify you up to $150,000 basedon the ratios above. Again, there isn't any published info on this... just going off of what I have learned through the process myself. I can tell you that my approval was based on 29% front end. Personally, I think that ratio is too high on the back end so we're going to keep our back end ratio in the 30%-35% range.
Did you have any other monthly debt pmts? Car, credit card, student loans...
My salary is $70,000/year. Other debts equal $600/month (1 car, student loan, and 3 CC's). I was approved for my county limit of $261,500.
How do you figure that out? I have tried and I am left all confused LOL
our annual is 39,000 with Monthly being $3250 salary. We only have $70 worth of debt each month...but I know our expenses and one program we looked at said our monthly could be no less than 29%, which is 942. We can't afford that!
We need our payment to stay as close to what we pay now in rent ($780) no more than $800.
I thought they subsidized based on where you are on the income scale ie, we are at 48% of the median income here in the Austin area, which puts us at 1%.
This process is confusing because I don't know anything because there is not even any funding
Everything you want to know about the Direct propgram is contained in the USDA Direct Single Family Housing Loans and Grants Field Office Handbook (HB-1-3550) which can be donwloaded here: http://www.rurdev.usda.gov/handbooks.html
If you look at pages 6-22 and 6-23 it says:
6.12 CALCULATING PAYMENT ASSISTANCE
A. Payment Assistance Method 2
The amount of payment assistance granted is the lesser of the difference between:
• The annualized promissory note installments for the combined RHS loan and eligible leveraged loans plus the cost of taxes and insurance less 24 percent of the borrower’s adjusted income, or
• The annualized promissory note installment for the RHS loan less amount the borrower would pay if the loan were amortized at an interest rate of 1 percent.
Borrowers receiving payment assistance method 2 must pay the greater of:
• A payment to RHS based on 24 percent of their adjusted annual income less the amortized payment for the eligible leveraged loan less the cost of taxes and insurance; or
• A payment to RHS based on an interest rate of 1 percent plus the amortized payment for the eligible leveraged loan plus the cost of taxes and insurance.
An eligible leveraged loan is a loan with payments amortized over a period of not less than 30 years and an interest rate that does not exceed 3 percent.
B. Payment Assistance Method 1.
The amount of payment assistance granted is the difference between the installment due at the promissory note rate and the amount the borrower must pay based upon income.
Borrowers receiving payment assistance method 1 must pay the greater of:
• A floor payment calculated as a percentage of adjusted income, less the cost of taxes and insurance; or
• The loan payment amortized at the applicable EIR.
1. Establishing the Floor Payment
The floor payment is a minimum percentage of adjusted income that the borrower must pay for Principal, Interest, Taxes, and Insurance (PITI).
• Very low-income borrowers must pay a minimum of 22 percent.
• Low-income borrowers with adjusted incomes below 65 percent of the applicable adjusted median income must pay a minimum of 24 percent.