If you already have a USDA home loan and are considering purchasing another property, you may be wondering whether you can sell your current residence. This is a valid question and knowing what you can and cannot do will save you a lot of red tape and headaches.
Stipulations on USDA home loans
If you have a USDA loan, the home you reside in must be your primary residence. You may be able to purchase another property under certain conditions:
- You must be able to prove you are financially able to own more than one home.
- The primary home must remain occupied under the current USDA loan until the loan is paid off.
- Circumstances and proof of those circumstances must be presented to demonstrate the primary home no longer meets your needs.
- The home cannot be financed by a guaranteed Rural Development or direct Section 502, 504 or active grant.
What exactly is a USDA loan?
A USDA loan usually qualifies prospective rural and suburban homebuyers with no money down. These individuals frequently have to go through alternative routes because they cannot obtain a standard mortgage loan. They can assist in three different categories: loan guarantees, direct loans, and home improvement loans and grants.
The home guarantees vary by the size of the household and location of the home. Additionally, the homeowner must be a U.S. citizen or have permanent residency, be able to pay a monthly payment that is 29% or less of your monthly income, have an acceptable credit history. Applicants who have a limited credit history or low credit score may also qualify, depending on the lender.
How does the USDA determine whether a home is no longer adequate?
The USDA has different ways to determine the adequacy of a residence. If the residence is not on a permanent foundation or there is a relocation for a job that is a lengthy distance away, the homeowner may qualify to purchase another home. Other circumstances may include disabled residents that cannot maneuver or overcrowding in the home.
Does this mean you may have more than one USDA loan at a time?
Again, there are certain stipulations that must be followed. If you have a 502 or 504 loan, you must sell your current home in order to qualify for another USDA loan. The only exceptions are those listed above, where the homeowner will have to prove they need relief from the current primary residence. Even if the homeowner meets all the qualifications, they must also demonstrate they qualify in terms of debt-to-income ratio.
Speaking to a lender who specializes in assisting individuals who may qualify for a USDA home loan is key. They utilize a USDA mortgage calculator to help determine how much everything will be.
It calculates the house price, down payment (if any), loan APR, term, property taxes, insurance, MPI, the USDA guarantee fee and any other miscellaneous monthly expenses.
By using this, prospective homeowners will know what to expect and the lender will be able to assess whether the individual will be able to handle the expense.