If you're looking to buy a home in the
country then USDA can be a great option if you qualify. But
should you apply for a USDA guaranteed loan or a USDA
direct loan? What's the difference? That's what we're talking about today,
so let's go. Hi everyone and welcome back to my
channel. I'm Bryn Cook and I'm a real estate agent here in Eugene, Oregon.
Today we're talking about USDA loans and the difference between USDA guaranteed
and USDA direct. Now I don't pretend to be a lender,
so you'll want to make sure that you reach out to your own lender with
specific questions when it comes to your loan needs.
But I do have a lending background and I have recent experience
helping clients in real estate buy country property.
I've closed both USDA guaranteed deals and am currently working on a deal that
is USDA direct. There are some significant differences
that you should be aware of when applying for this type of loan.
let's start out by discussing what a USDA loan is in general. USDA stands
for United States Department of Agriculture.
Home loans through the USDA help people with low to moderate-income
by offering affordable payments on homes in rural areas
throughout the United States with no money down.
The loan guidelines are pretty similar whether your loan goes directly through
the USDA where the USDA acts as the lender or is
held with the USDA approved private lender and is
guaranteed by the USDA. Now I'm going to keep the differences
between direct and guaranteed USDA loans at a high
level and not get into the details when it comes to income,
the property, or credit requirements in general.
USDA works for buyers who have low debt, low to moderate-income,
and good credit. The specific requirements
are relatively easy to find with some research online or by calling your local
USDA approved lender. What I am going to share with you is the
experience that my clients have had with each type of USDA loan when trying to
get their offers accepted and the experience during the escrow
First, let's start with the approval
process. In general the approval is faster with the USDA guaranteed program.
You are primarily dependent on the private lender's timelines for
underwriting with usda reviewing the file at the end
of the transaction to make sure that everything fits within
the usda guidelines and to make sure that they will
guarantee the funds at the time of closing.
It's basically the same process as any other loan with the exception of the
additional time added for the USDA file review.
That final review can take anywhere from a few days to a few weeks depending on
how backed up the USDA underwriters are. As
far as the USDA direct goes, they do the full approval for the buyer
up front. That process can take weeks to months
depending on how many loans are inline and the government funding for the
program. If the funds run out while you're waiting for approval,
then you may need to wait until the program is replenished in order to move
forward with your home purchase. Now the advantage to the buyer with the
direct program is that the costs for the direct program tend to be lower than the
guaranteed program and the direct program provides payment
assistance in the form of a subsidy.
That can make
the difference between being able to qualify for a home loan or not.
USDA direct may be the only option for lower-income
buyers. Once you're approved for the USDA direct loan and find a seller willing to
accept the terms, then it takes another 45 to 60 days to
get through the escrow process. The other main difference from the
process perspective is that the USDA direct
requires a copy of the home inspection so that they can request
needed repairs on the home. In the majority of other loan programs, the home
inspection isn't something that the lender reviews.
The inspection is strictly for the buyer's purposes and provides the
information about the house in order to ensure that the buyer feels
comfortable moving forward with the purchase.
Whether repairs are requested is typically up to the buyer or
the appraiser in some cases.
Having to send the inspection to the lender
may be something that the sellers aren't comfortable with when reviewing your
offer. It's important that you understand the
differences in the programs when applying for either type of usda loan
or reviewing offers on the sale of your home.
If you found this information helpful, you may want to check out my playlist on
the home buying process in general. Feel free to contact me with questions. I
work hard to stay connected. I'd love to have you subscribe to my
channel and join me for my next video. Thanks so much for watching..