Pennsylvania Home Buyer

USDA loans in PA

The USDA loan, also known as the USDA Rural Housing Loan Program is a 30 year fixed rate mortgage that is designed for low to moderate income home buyers. The house must be located in an USDA eligible area of Pennsylvania. The USDA mortgage loan does not require a down payment (100% financing plus the guarantee fee). The USDA home loan is a zero down mortgage program. Home buyers must meet the income limits for PA (see below). You can estimate the USDA loan amount and mortgage payment with the USDA calculator. The loan is "insured" by the United States Department of Agriculture.

USDA Maximum Loan Term - 30 year fixed rate only

Usda loan limits - There is no maximum loan limit with the USDA mortgage in Pennsylvania. Qualified Pennsylvania home buyers are permitted to borrow as much as 100% of the appraised value or purchase price (whichever is higher) in addition to the guarantee fee. In the event the appraisal is greater than the sales price, the applicant is allowed to finance the closing and prepaid costs for the difference between appraised value and the sale price.

For example:
Sales price = $100,000
Appraised Value = $105,000
Closing and Prepaid Costs = $7,000
Financed Closing and Prepaid Costs = $5,000

USDA Interest Rate - The USDA interest rate is established by the mortgage lender offering the loan, however, the USDA does require lenders to stay below a maximum interest rate based on a Federal National Mortgage Association pricing formula. The USDA is for fixed rate interest rates only. See current interest rates

USDA loan down payment - No down payment required, however, applicants can make a down payment, which will lower the monthly mortgage payment

Usda guarantee fee (sometimes called a funding fee) - There is a one time guarantee fee payable to Rural Development. This fee can be paid at the closing or financed in the loan.

Purchases: 2.00% of the loan amount (effective October 1, 2011)
Refinances: 1.00% of the loan amount

Do you pay pmi with a USDA loan? - Effective October 1, 2011, the USDA (also known as RHS) mortgages requires a monthly mortgage insurance fee. The monthly mortgage insurance (mip) should not be confused as a fee for term life insurance. It isn't. The monthly fee, is paid by your lender from your mortgage payment to the United States Department of Agriculture. The monthly fee (in addition to the fee) guarantee is used to reimburse lenders for losses from foreclosure. The USDA mortgage calculation is a bit confusing. You can use the USDA calculator to estimate the monthly USDA mip fee.

Usda mortgage requirements:

  1. US Citizens or Permanent Resident Aliens (with proof of lawful permanent residency).
  2. Borrowers must have a social security number and must legally live and work in the U.S.
  3. Unable to secure the necessary credit from conventional sources without a Guarantee (meaning that they do not have liquid assets- checking or savings accounts - totaling more than 20% of Sales Price.) (401k & IRA
  4. Retirement accounts are not counted as liquid assets)
  5. Applicants must have legal capacity to incur the loan obligation (over 18 yrs of age).
  6. Applicant(s) must be the owner occupant(s). (Single Family homes only

Do I need to be a first time home buyer for a USDA loan? - There are NO first time home buyer requirements with USDA home loans.

Usda loan occupancy requirements - All borrowers must occupy the property as their principal residence within 60 days of closing. Investors and non-occupant co-borrowers are not permitted with the USDA home loan. Applicants can not currently own an adequate dwelling in the local commuting area (50 mile radius) of their employer or are selling their current home (sales agreement required)

MINIMUM ADEQUATE SITE - The value of the Appraiser's "Opinion of Site Value" must not exceed 30 percent of the total value of the property, unless the lot size is typical for the area and subdividing is prohibited by local zoning. The property may not be located in a 100 year floodplain (Flood Zone A).

USDA home loan eligibility guidelines

  1. The home must be located in a rural area of Pennsylvania as designated by the USDA.
  2. The home must be residential (non-farm and non-income producing tracts only).
  3. No Hobby farms
  4. No properties with farm land or farm service buildings as well as commercial/industrial properties.
  5. Generally, no homes with in ground pools, however, it may be possible
  6. Modular and manufactured (i.e. NEW mobile homes) on a permanent foundation housing may also be acceptable.
  7. New construction is acceptable with conditions.
  8. Condominiums must be approved by the requirements of FHA or Fannie Mae or Freddie Mac. Projects cannot be an ineligible project type.
  9. Planned Urban Developments (PUD's) are ok.

USDA Loan Inspection Requirements - If the property is NOT on serviced by a public water system, the well must be tested for Total Coliform. For private septic systems, no septic certification is required (unless Appraiser notes a septic problem). No Pest Inspection required (unless Appraiser indicates a pest problem or is not qualified to make determination). The USDA needs certification that the home meets current FHA/HUD Handbook 4150.2 and 4905.1 Standards. All required repairs must be completed prior to closing. The Thermal Requirements have been Eliminated as of January 10, 2008!!!

USDA Income Eligibility Guidelines - There are two separate income calculations that are evaluated for USDA Rural Development loans. Annual income to determine program eligibility and debt to income (see below). Household income must be under the income limits (see income limits). All income from all persons in the household must be counted and total household income must be under the limits for the county where the property is located. USDA income lookup

USDA Income Eligibility - The adjusted annual income of the loan applicants must not exceed the income limit for the Pennsylvania county in which they are purchasing a home. Lenders use year to date income calculation to establish the PA county income limit. You can use the year to date income calculator to annualize the monthly income.

USDA Credit Guidelines - Loan applicants must have a credit history that indicates a reasonable willingness to meet their credit obligations and have the ability to repay their debts. Applicants must have an acceptable credit history -
> No more than 1 x 30 late in last 12 months,
> No open collections,
> No chargeoffs, foreclosures, or bankruptcy in last 3 years.

A credit score of 640 and above for applicant(s) means the Lender is not required to submit documentation to request a credit waiver (with positive compensating factors) for delinquent credit issues, except Bankruptcy, Foreclosure, & delinquency on Federal debt. The lender must count all debts with 6 payments or more remaining, including deferred student loans (use 1% of balance if no payment listed).

USDA loan income eligibility - The home buyer(s) is required to have adequate and dependable income that is sufficient to meet all credit obligations. The maximum debt to income ratio is 29/41%; however, there is the possibility for exceptions. The USDA can issue debt ratio (income) waivers for borrowers with higher ratios who have positive compensating factors including; good credit scores, conservative use of credit, low payment shock, etc. USDA lenders calculate the debt to income ratio by using the previous year's W-2's & year to date income to obtain the front and back end ratios. Debt to Income Calculator

GIFTS - Gifts or grants are permitted from relatives or friends, charitable organizations, municipality or non‐profit organization.

USDA Home Loan Seller Concessions (seller assist) - The seller can pay up to 6% of the sale price for closing costs, lender fees, eligible repairs and buy downs. The seller assist cannot be used for discount points. No cash back at closing as a result of the seller assist. The seller is not required to pay the buyer's closing costs.

Multiple Property Ownership - Borrowers may retain their current home. Lender guidance is required on this topic.

USDA home loan refinance requirements  - USDA refinance loans are available for existing USDA mortgages only!

How much does it cost to buy a house in Pennsylvania?

Use the PA mortgage calculator to estimate the down payment, closing costs and monthly payment for FHA, VA, USDA & conventional loans.Closing cost calculator

First time home buyer classes listed by county

Learn about Pennsylvania's home buying programs. Read more

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