Buying a home is one of the single-largest investments in a person’s life – and also one of the most exciting. A home is more than a financial investment, but a step toward the American Dream, something the USDA home loan program works hard to uphold.
To help potential homebuyers be prepared for the USDA loan process, we’ve outlined the major steps to getting a USDA loan below.
1) Prequalify For a USDA Loan
Prequalifying for a USDA loan provides a general estimate of what you can afford, and if you are even eligible for the program. This vital step can save you much time and effort by helping narrow down what homes you may be able to purchase.
2) Receive Your Preapproval Letter
Preapproval is a more thorough process, taking account of pay stubs, W2s, your employment history, investments and other financial information. At this stage, the paperwork may seem like a lot, but once you are preapproved, sellers are more likely to take your offers seriously.
Understand that preapproval doesn’t mean you are guaranteed a USDA loan. There are often conditions that must be met, such as not taking on any new debt or credit.
3) Find a USDA-Approved Home
If you haven’t already, find a knowledgeable real estate agent and start the home search. Armed with your preapproval letter, and the knowledge of what areas are eligible for a USDA loan, you and your agent will have no trouble securing your dream home.
4) Sign a Purchase Agreement
Once you sign a purchase agreement, your lender will order a USDA loan appraisal. Appraisals are different from a home inspection and are required by the USDA as a safeguard to the homebuyer. The appraiser will ensure the home is move-in ready and that the property meets USDA standards. If something does meet standards, it must be fixed before closing.
5) Processing & Closing
Once you are under contract, an underwriter will review your information and examine the file to make sure your application and documentation are accurate and truthful. Once underwriters are satisfied, your lender will issue a clear to close, and you’ll move toward your final step: the loan closing. At closing, you’ll sign paperwork, finalize your USDA loan and take ownership of your new home.