USDA Loans Explained - Requirements and How They Work

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hello everyone and welcome to another

real estate video this is Xavier V Danya

the real estate YouTube guy here in

Phoenix Arizona helping you accomplish

your home goals so today's video is

going to be about USDA loans so I've

been getting this request for this video

for a while now and most responses I

give people is listen I just don't do

USDA loans that much in my part of town

I don't feel comfortable giving a video

about that but as this channel continues

to grow and it's becoming more part of

people's home journeys I really want to

make sure that you know instead of the

you going and Google and finding wrong

information I want to be at least some

source to get you started on your

journey so instead of me coming from

this point of I know already what I'm

talking about

so I'm telling you just what I know so

what I did is I researched this topic

heavily I called a bunch of people I


lenders agents have done a lot of USDA

loans I did a deep dive online and

heavily research the topic for you guys

so essentially the USDA loans does in

fact come from the same government

program that you're probably familiar

with the food one right so I was very

surprised to find this out this

government programs responsible for like

developing and executing laws related to

farming forest foods all kinds of things

that you the high lease I associated

USDA with but one thing that I found

interesting in my research are the

following that promote agriculture trade

in production to assure food safety to

end hunger in the United States and this

last one is the crucial one that I think

relates to these kind of loans to foster

ruler communities so essentially they

dip their toes into real estate because

they want to provide affordable home

ownership opportunities to promote

prosperity which in turn creates

thriving communities and improves lives

in rural areas they believe by improving

these rural areas that are largely based

on agricultural and you know farming and

all that stuff I'm sorry I'm not too

experienced with that ranching stuff

they're they believe by expanding these

areas and making a more robust that an

intern to help that community and

hopefully helps equality and the

quantity of the foods being produced one

thing I want to make sure you guys have

a disc clear distinction on is the

difference between this program and a

first-time homebuyer downpayment

assistance program a first-time


payment assistance program is still

having a down payment in play so if you

buy a house for two hundred thousand

there's still a down payment there now

it might not be coming from you but

there might be a down payment coming

from the government or from other some

other kind of entity so if you're buying

a house for two hundred thousand the

down payments I don't know seven

thousand well the loan amount is gonna

be one ninety three so even though the

seven thousand didn't come from you it's

coming from somewhere else so the loan

amount is actually closer to one hundred

ninety three thousand not the value of

the house you're buying it in you're

buying the house with an instant seven

thousand dollar at esque of equity

because that's the down payment that was

put in with USDA this is a hundred

percent financing so if you're buying a

house for two hundred thousand the loan

amount will be a two hundred thousand if

not little more because of fees so the

only equity you're gonna be building

from this house is going to be the

market going up or any kind of

renovations you do to the property or

maybe specific neighborhood maybe the

area gets more populated who knows what

well as opposed to the other out

first-time homebuyer assistance program

they're still downpayment there so the

equity is going to be building off your

initial down payment that you put down

so once again first-time homebuyer down

a payment down payment assistance

program the loan amount would be one

ninety three or closer to one ninety

three whereas USDA a same house the loan

amounts in be two hundred thousand now

now that we know that let's continue

so in brasstacks there's two ways you

can get a usda product for your home the

first way is to do a direct loan from

usda now these are more for the lower to

moderate income folks and when my

experience most times people talk about

usda product is in referring to this

direct route the other route is a

guarantee which a nut which is when

another bank funds and originates alone

however it's not USDA doing all the work

they're just guaranteeing it and this is

from my experience for more higher

income or at least what I've researched

in my and one of my research from

researching my research so in this case

most people talk about the direct route

if you're more experienced in the

guaranty route I love to email and talk

to you a little further so we can make

another video

about it but for now we're gonna talk

directly about this regardless of what

route you take though I want to make

sure to have you give you this asset the

number one thing you should be doing

before you go talk to a lender before

you go talk to an agent is checking out

the USDA eligibility site I'm gonna link

it below I'm gonna have a big ol thing

here but you're probably going to not

want to type it out so one of the first

things I'll leave below is this website

in this site you'll be able to see the

direct route in the guarantee route in

this case we're gonna talk about the

direct route and you're gonna be able to

see the income limits the eligibility

for properties what areas and all that

good stuff so in this case we're gonna

talk about the income now every county

is different that you guys I just got a

surprise for my family what that's yours

go say cheese

no okay I'd assume they use the average

income of the area I don't want to get

to the specifics how they determine the

income eligibility however you want to

make sure to reference it look up your

county and when I looked at the site I

clicked the link and they showed me a

PDF you know that's where you want to

find your city slash county and see what

the income limits are now it's really

important to note that there's not just

a standard income limit it's based off

your family size or the people living in

the house so for if you have one or two

people living with you then it's gonna

be on the lower side you know it might

be twenty thirty forty thousand a year

now if you have eight people or ten

people live in your house then that's

gonna grow substantially so please try

to be accurate and don't just look at

the number account for how many people

are gonna be living with you and

probably the most crucial part about

this is this is where you're able to

determine what areas qualify for a usda

product like I said before they're meant

for rural areas so you're not gonna be

able to get a USD alone in a big metro

city you're not gonna be you know in

downtown bond USDA alone it's meant

specifically for rural areas I'm sure

there's specifics of the population size

and whatnot honestly the best way for

you to verify it is to find a property

address that kind of in a similar area

or go to this website click click the

property address and it'll automatically


you if it's available or not I also was

able to find a map where it specifically

says what areas qualify for it what

areas do not and in my case in my city

it's very clear anything with a lot of

people living in it no chance the

further ones out which are usually the

areas that you're driving by we're not

like going to Disney that or something

those are the areas that do qualify for

USDA one thing I noted in my research is

some areas some cities you'd be

surprised about what's considered for

USDA eligible for example in 2010 I told

you about Buckeye batting I didn't

really consider that area rural but for

some reason during that time it was now

you might have a Buckeye in your city

still that's not too far away but would

able to qualify USDA so this is a good

to a good website where you need to find

out what cities actually qualify for

maybe a family member of yours bought in

a certain city with USDA and don't just

take their word for it go and verify on

this website so in summary what I just

said use this website to determine the

income limits and the eligibility of

what area you would be able to do a usda

alone after doing this you probably want

to know what are the basics of this

program now I don't know if it's

different in area area I don't know if

it's different for every lender so this

is just what I was able to research

please use this as a starting point and

don't take my word as loss only for

single-family homes you can't buy a

property that's also an agriculture or a

farm or anything like that if you're

gonna get a manufactured home has to be

either a new one or a new ish one please

verify on that one but you can't use

this property like I was saying to buy a

house with two acres of agriculture or

farming uh next to it now you can buy

single family that has land I think but

you won't be able to buy a farm or

something in commercial excess I'm sure

there are other product products prozac

pro to products that are able to goes

USDA or other routes but that's

something for you to the lender to

discuss now here's a key distinction

it's not a first-time homebuyer program

but they don't like you owning any other

property anywhere else because they're

they don't want people to come and take

advantage and just be buying houses with

zero down right so if you've had a home

in the past you don't have anymore that

might work if you sold something that

might work but it's not meant for just

first-time homebuyer

if you don't have a house now or maybe

there's certain situations like you have

a house and have it rented out or you

just moved out of state

it might work talk to your lender to

verify credit that I saw is like from

620 and around that range and up I

believe you are able to qualify but the

debt to income ratios are gonna be a lot

tighter and if you don't know what that

is watch my other videos where I discuss

this and if you're in the higher credit

bracket like in the 700s and up then

your debt to income ratio can be a

little more loose but not by much it's

like 45 percent so I really wanted to

verify with the lender if that really

helps your interest rate or not but with

government programs interest rates are

all the same across the board I'm not

sure if a higher credit will be able to

deduct that interest or not and that's

it guys that's all I was able to kind of

digest and hopefully this video helps

you at least initiate everything one big

recommendation I'm gonna give you from

the get-go is don't just go on that

website and just if you see it doesn't

work for you just give up if you have an

area that you already like if you have a

house in mind then continue it pursue it

talk to a lender my thing is is if you

want to do USDA talk to a lender don't

just discourage yourself from what you

see on the website if there's an area

you like and it's qualifying for USDA

and you seem like you kind of have the

general sense or that everything into

play then pursue it don't give up

regardless if it's USDA or downpayment


these are usual topics that get people

started in buying a house so don't be

discouraged and start you know continue

this thread and see where this takes you

and that's all the time we have for

today guys thank you so much for

watching I appreciate your time if you

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stuff so thank you guys so much again I

appreciate your time and I hope you guys

have a