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USDA loan and mortgage reserves

Contributions: 1

Q&A

:1

I am looking to purchase a home that is in a USDA approved area and I qualify for a USDA gauranteed loan. My credit score and income are acceptable but I don't have three months reserve in the bank. Since this would be an FHA loan I am seeing that FHA doesn't require reserves...is this accurate? USDA states that there is no downpayment or closing costs. I'm wondering if anyone can advise about the lack of reserve and any other fees I would absorb financing a home this way.

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July 03 - Davenport

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Steve Jacobson, "Steve Jacobson"
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Steve Jacobson, "Steve Jacobson"

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Hello,

Reserves are required for your escrow account for property tax and insurance. Under a USDA, no other reserves apply.

You can finance closing costs up to the appraised value. Example: Purchase contract is for $100,000 and the home appraises for $105,000. You can finance up to $5,000 in closing costs. The seller is also permitted to pay your closing costs.

Hope this helps. You can learn more on our website or give me a call.

Best,
Steve

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August 08

Roxy Redenbaugh, "LoanLady Nationwide"
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Roxy Redenbaugh, "LoanLady Nationwide"

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I think you may be confused about USDA vs FHA they are not the same. Or maybe I am not understanding your scenario. USDA loans are income driven and don't require a reserve. They will only pay up to 2 pts of the closing costs not all the closing cost. The lender you are working with may require reserves if your ratios are high or credit scores are low, but not USDA. Also if you don't have enough $$ for closing the seller is allow to contribute up to 6% on a USDA loan.
Of course this would need to be negioated up front on your purchase contract.
Good Luck, hope this helps.

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July 03

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Question USDA loan and mortgage reserves

Related Articles about Buying Process

Guide Real Estate Buyer's Closing Costs

Guide List of Closing Costs and Fees

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Guide Home Buying One Step at a Time

Guide A Buyer's Guide to Making the Right Choice

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