USDA Mortgage question for purchasing second home

[Anonymous]

Does anyone know what the rules for purchasing a second home are for USDA loans?

I have a house i dont want to sell and take a loss on -

I've been working with a broker who is out for a few days , he recommended and pre-approved us for usda loan, but we didnt talk about carrying the old mortgage while purchasing another home.  ... now im anxious to find a answer.

we looked at a place we like and its cheap enough that both the new and old mortgage combined with all other bills would still fall at 39% of our income.

so-our income is plenty to cover both loans.

already had credit scores run,

just want to know if anyone knows about if they will approve a loan for a second home, as primary residence while keeping the old loan and renting it out???

ps - we dont need the rental income added to our income to make the ratios work.

[ShanetheMortgageMan]

Generally you can't own another home when purchasing a home with USDA, there are a few exceptions.  Where is the new home located compared to where you live now?  Why are you buying the new home?

[Anonymous]

Just a update incase anyone else has the same question.

I found out yes you can keep a previous home, as long as your income is enough to cover the expenses , and as long as you plan on living in the new home purchased with the USDA loan. .. Which is understandable because they are not funding someone who is just purchasing as a investment.

Of course be careful that you didnt sign anything agreeing to live in the first home for a set amount of time.  I did not since it was a conventional loan.

[ShanetheMortgageMan]

Where did you get that information - as long as your income is enough to cover the expenses?  Sounds like a loan officer talk, one who isn't very familiar with USDA's guidelines.  The only time you can own another home is if the other home is not in the commuting area, or if it's not structurally sound or functionally adequate.  Being able to qualify for both payments is a given.

See: http://www.rurdev.usda.gov/regs/regs/pdf/1980d.pdf

§1980.346  Other eligibility criteria.       

The applicant must:   (a)  Be a person who does not own a dwelling in the local commuting area or owns a dwelling which is not structurally sound, functionally adequate. 

See: http://www.rurdev.usda.gov/va/programs/SFH/Agnes/GRH%20Lender%20Origination%20and%20Underwriting%20G...

Applicant must:

• BE a U.S. CITIZEN, a U.S. NON-CITIZEN NATIONAL, OR  HAVE QUALIFIED ALIEN STATUS

• PURCHASE a RESIDENTIAL PROPERTY THAT IS LOCATED in a RURAL DEVELOPMENT ELIGIBLE AREA

• NOT HAVE SUFFICIENT RESOURCES TO PROVIDE AND SECURE CONVENTIONAL CREDIT (ON TERMS AND CONDITIONS THAT THE APPLICANT COULD REASONABLY BE EXPECTED TO FULFILL) WITHOUT A  RURAL DEVELOPMENT GUARANTEE 

• NOT EXCEED THE MODERATE INCOME LIMITS BASED ON THE  HOUSEHOLD’S ADJUSTED ANNUAL INCOME

• NOT OWN A DWELLING IN THE LOCAL COMMUTING AREA or OWNS A DWELLING WHICH IS NOT STRUCTURALLY SOUND &/or FUNCTIONALLY ADEQUATE

The objective of the Single Family Housing Guaranteed Loan Program (SFHGLP) is to assist eligible households to obtain decent, safe, and sanitary dwellings and related facilities for their own use as their primary residence in rural areas. RD Instruction 1980-D restricts applicants from owning multiple dwellings in certain cases, specifically in§1980.346(a), under eligibility criteria. 

The GRH program considers a property ineligible that has the potential to be viewed as investment property.  Generally, borrowers must sell the old (existing) property, meaning at a minimum they have a sales contract with a verified closing date prior or simultaneously to the GRH loan closing.

Sometimes, there are circumstances where retaining the existing home (outside of local commuting area) may be acceptable:  If an individual or family has been transferred or found employment in a different state, and their old residence is not in the local commuting area of their new employment location, they meet the requirement of not owning a dwelling in the local commuting area.  The applicant must…”Be a person who does not own a dwelling in the local commuting area or owns a dwelling which is not structurally sound, functionally adequate.”

Example:  If an individual or family has been transferred or found employment in a different state, and their old residence is not in the local commuting area of their new employment location, they meet the requirement of not owning a dwelling in the local commuting area. 

Example:  If the home has documented structure, safety, or sanitation issues, or if it is a manufactured home not anchored on a permanent foundation, it would not be considered structurally sound or functionally adequate.

• HAVE ADEQUATE AND DEPENDABLE  QUALIFYING (REPAYMENT) INCOME

• HAVE ACCEPTABLE CREDIT HISTORY THAT MEETS RURAL DEVELOPMENT REQUIREMENTS

[sweetpea3829]

My experiences with USDA is that you CAN have a second home if you're using the Guaranteed program, as long as your income supports both mortgages. But, if you are going Direct, you cannot have another house in your name. I *think* they'll let you apply, but you must have your first house on the market. And the situation must be like Shane described, the first house is outside of your commuting area, or it's not functionally safe, etc etc. There is a way around this, but it may not necessarily apply to everyone. We own a multifamily home in RI. My husband took a job in NY. We can't sell our home in RI. So we used a quit-claim deed to remove my husband's name from the title, thus freeing him for USDA. But, the other piece of this is that the mortgage for the first home was discharged in a 2007 chapter 7 bankruptcy, so we don't have to disclose it as an expense when my husband applies. The down side is that USDA still counted the rental income and because of that, we nearly didn't qualify.