San Diego 0% Down USDA Home Loan - Rates, Limits & Details (2024 Update)
In this post I break down the ins and outs of the $0 down USDA home loan in San Diego.
This mortgage loan is great for anyone that wants to live on the outskirts of San Diego (think Fallbrook, Pauma Valley, Ramona, Julian, Palomar Mountain, Campo, etc), doesn't have a down payment, extremely historically low interest rates, and lower monthly mortgage insurance than an FHA or conventional loan.
In this post I go over:
- The loan's main details and highlights...
- Some of the most common questions (and answers)....
- Some secrets of this loan you may not be aware of...
- The (potential) cash out of pocket minimum you can expect...
- The main supporting documents you will be needing...
- The fast, easy, and secure way to apply online...
(Please keep in mind I am approved with 40 +/- wholesale lenders in the state of California and each lender will have different USDA loan requirements. Things like credit scores, months reserves, DTI's, etc can vary from lender to lender and the below are used for examples.)
- It is *not* just for first time home buyers - it is for everyone. Whether you have never owned before - or have, that's fine. (And, a fun fact - a first time home buyer is someone who has never owned a primary residence and/or not in the last 3 years. So, even if you own your primary residence, 4 years ago, and haven't since, you are a FTHB :-)
- This is for a home, townhome, or condo. I do not personally deal with vacant land, manufactured homes, nor mobile homes and have no idea if you can or can't with them.
- This is *not* for a working farm - this is for a home, townhome, or condo that you will be living in.
- It is address specific - as mentioned, think of the outskirts of San Diego, think countryside, think places like: Fallbrook, Pauma Valley, Ramona, Julian, Palomar Mountain, Campo, etc. Here is the direct link where you can put in the address of any property you might have an interest in and see if the address works. If it does, great - if not, it doesn't work going USDA.
- There is an income limit. You can use this direct link to see if your income falls within the guidelines of being okay. If your income is that amount or lower, depending on your family size - you are golden. If not, you cannot go USDA.
- However, to give some examples I checked for a family of 4 people, with 2 adults, and 2 kids under 18, and the max income allowed for ths example is: $142,400 per year or $11,866 per month. (If you have child care expenses, and the child or children are 12 or under, you can potentially have a higher income). So, if you make this amount or less for your entire household - you are great.
- Debt to income ratios (DTI) on this is a bit different. Generally speaking we use 29%/41% for the front end and back end ratios. But, I have seen as high as 34%/46% ratios with a better credit profile.
- Simplified, if you make $10,000 per month gross (before taxes) that means we can go *as high as* $3400 per month for a total housing payment and as high as $4600 per month in total debts (what's on your credit report + future housing payment / average gross income over 12 months). But, please keep in mind - generally speaking we are at the 29/41 ratios.
- Current credit score needed is a 550 middle fico score and/or the lowest middle fico score if you are applying with someone else. Generally speaking the higher your credit score, the lower your rates, and the more likely to get a higher DTI allowed.
- There is no maximum loan amount. If you qualify for the loan, it's within all ratios, we have no max loan amount.
- There is a low 1% upfront guarantee fee and an annual guarantee fee of 0.35% (compare that to an FHA loan with a 1.75% UFMIP and 0.80% monthly - the USDA is much lower.
→ The waiting periods for the USDA Loan are as follows:
- 3 years from Chapter 7 discharge date
- 3 years if you have a foreclosure
- 3 years if you have a short sale
(Please keep in mind your personal situation might be different and these are used as examples only).
→ Question #1 - How can I easily find out what homes work for this program in San Diego?
It's actually very simple. Head on over to this site and you can type in any address to see if the property location works. As a general rule of thumb for San Diego County think countrywide such as: Borrego Springs, Falbrook, Rainbow, Bonsall, deep Oceanside and Vista, deep Escondido, Pauma Valley, Ramona, Julian, Campo, etc.
→ Question #2 - Whict types of properties does this work for?
This works for an owner occupied home, townhome, or condo. This does not work for a multi unit property or a working farm. I personally do not work with land loans or manufactured/mobile homes. So, keep it easy - home, townhome, or condo you live in.
→ Question #3 - I understand this is a $0 down loan. How about closing costs?
Closing costs can be paid a few different ways. You can pay them, the seller can potential pay them, you can use a lender rebate to pay them, or a combination of all three. Keep in mind you have closing costs (lender, escrow, title, notary fees, etc) but also pre-paids (such as interest, taxes, insurance, etc).
→ Question #4 - Are there max incomes allowed and how can I find out what these are?
You can see this link and easily find out, based on your own situation, what the max income would be allowed.
→ Question #5 - What are some cons (or potential cons) to this loan?
Here's a few - You have a lower debt to income allowed with a USDA loan as opposed to an FHA or conventional loan. You have to buy a property whose address is located within the USDA zone. If you have "too much" excess cash availlable you won't qualify. It doesnt work for an investment property.
(Please keep in mind your personal situation might be different and these are used as examples only).
→ Secret #1: Other $0 Down Options Available
As obvious advantage of the USDA loan is the fact you can put down as little as 0% for the down payment. However, if your desired property doesn't work (maybe due to location or other reasons) you can also look at the Down Payment Assistance (DPA) option as well as a VA loan (if you were or are in the military).
→ Secret #2: Lower Monthly Payments Than a Conventional or FHA Loan
The great thing about the USDA loan is the fact that, generally speaking, has a lower 30 year fixed interest rate than an FHA or conventional loan, has a lower upfront guarantee than an FHA loan does (conventional doesn't have one), and lower monthly mortgage insurance than an FHA or conventional loan.
→ Secret #3: Works in More Areas Than You Might Realize
Yes, it is address specific and only works on the outskirts of San Diego - but, you might be surprised which areas might be included based on it's address. Parts of - Fallbrook, Oceanside, San Marcos, Vista, Escondido, Pauma Valley, Julian, Ramona, Santa Ysabel, Campo, Dulzura, etc.
→ Secret #4: You Do *Not* Need to Be a First Time Home Buyer
It doesn't matter if you have never owned before, or have, the USDA loan is fine for anyone. While there are some down payment assistance programs that are just for FTHB - the USDA loan is not.
→ Secret #5: Higher Income Limits Than You Might Think
There is an income limit. You can use this direct link to see if your income falls within the guidelines of being okay. If your income is that amount or lower, depending on your family size - you are golden. If not, you cannot go USDA.
However, to give some examples I checked for a family of 4 people, with 2 adults, and 2 kids under 18, and the max income allowed for ths example is: $142,240 per year or $11,866 per month.
(If you have child care expenses, and the child or children are 12 or under, you can potentially have a higher income).
So, if you make this amount or less for your entire household - you are great.
(Please note this can vary from borrower to borrower so this is just some helpful guidelines: Your own deposit, home inspections, and home appraisal may vary).
Let me be very clear - I 100% understand if you buy with $0 down, we have the lender pay closing costs via a lender rebate (or maybe ask seller to pay some as well), that limits your cash out of pocket - maybe to $0. I 100% get that and so do 99.99% of all agents. But, you *will* have cash out of pocket. Below, are what I am experiencing with clients.
→ Deposit - You should count on putting between 1% to 3% of your sales price - as your deposit into escrow - within 3 days of your offer being accepted. This is totally negotiable between the buyer (you) and the seller. I have helped clients with as little as $500 into escrow. But, keep in mind with the low inventory in San Diego, and lots of offers on each property, that's not a likely scenario.
Please keep in mind this is 100% refundable - if it's not used for the down payment, closing costs, or escrow impounds - and refunded back at the close of escrow.
→ Home Inspections - You *should* use a licensed home inspector to check out the property to understand the kind of shape it's in. Do you HAVE to? No, just highly recommended. Depending on if it's a home or townhome/condo it will be somewhere around $250-$750 +/- just for a basic home inspection by a licensed 3rd party inspector.
(Please keep in mind - you can choose to inspect anything you want. The roof, septic, plumbing, electrical, pool, spa, foundation, etc. There are no limits to the inspections you can make as the buyer.)
→ Home Appraisal - You will need to get a home appraisal on the property since you are getting financing. You pay this directly to the appraiser. This has nothing to do with the buyers agent (me), the listing agent, the seller, the lender, etc. This will be around $600 +/- for a standard appraisal.
→ My offer to you: If you use my services for the real estate and loan I will credit towards your closing costs at the close of escrow whatever you spent on your home inspection and appraisal as my way of saying "thank you" for utilizing my services.
(Please keep in mind these are the basic documents we will probably need. Depending on your personal situation we may need more or less and will advise accordingly).
- Copy of your drivers license (screen shot is fine)
- Copy of your social security card (screen shot is fine)
- Last 30 days paychecks (you should get these from your employer via email and PDF each time you are paid).
- Last 2 months bank statements - all pages (You just log into wherever you have a bank acount online and save the last 2 months via PDF.)
- Last 2 years taxes and W2's - If you do not have them you can get them from the IRS website here.
- Latest statements if you have anything like: 401(k), retirement, stocks, bonds, mutual funds, etc. (You just log into wherever you have these online and save the last statement via PDF.)
- If you are self employed we will need last 2 years taxes and W2's (if applicable) as well as year to date profit and loss sign and dated (you can do this - doesn't need to be a CPA).
- We can potentially need more depending on things like: pay or collect child support, have been divorced, have had a short sale or foreclosure, have filed bankrupcty, have rental properties, etc.
- Fill out my online application at Scotts Loan App.com. If it's just you - then you fill it out just for yourself. If you are married - it's you and your spouse (regardless if they work or not, their income, their credit, etc.) If its you and a co-borrower - then you both fill it out.
- Once complete I will be alerted, check everything over, send you out a list of needed supporting documents, and clarify anything if needed
- Once I get the needed supporting documents from you I will double check the application, your needed supporting documents, pull your credit report (it's currently $40 +/- and I pay for that), and get back to you with best scenarios.
- If a USDA loan doesn't work for whatever reason we can always look at going with another loan program that's better suited for your needs.
I would love to help assist you with your USDA loan - please feel free to give me a call, text, or use the form below.
Your USDA Insider,