What Do I Need To Apply
To start applying with Rocket Mortgage®, we recommend you have the following information on hand:
- A separate email address for each person that will be on the loan
- Your online banking username and password, or details about how much money is in each account you want us to consider for your approval
- Your income and employer information
- Your Social Security number
Low Usda Mortgage Rates
Private banks and mortgage companies offer USDA loans at very low rates. The USDA backs these loans, making it safer and cheaper for private banks and mortgage companies to lend. The savings are passed on to the home buyer in the form of lower rates.
USDA loan rates are often lower than those available for conventional and FHA loans. Home buyers who choose USDA often end up with lower monthly payments considering higher mortgage insurance fees associated with other loan types.
Everything You Need To Know About A Usda Loan
4-minute readFebruary 03, 2022
If you want to buy a home in a rural or suburban part of the country, securing affordable financing is a breeze with the USDA home loan program. Although there are some income restrictions, a USDA home loan could provide the opportunity you need to purchase the home of your dreams.
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Would You Qualify For A Mortgage From Rocket Mortgage
Rocket Mortgage looks at a number of factors to determine what loan products you qualify for. FHA loans have the lowest minimum credit score, at 580. Most conventional loans will require a score in the good credit range, or better. Youll find the lowest rates and most reasonable terms will be available to those with higher credit scores. This is one of the reasons most lenders urge homebuyers to improve credit scores prior to applying for a loan. It saves you a significant amount of money over the course of a mortgage.
Another factor thats considered is your debt-to-income ratio. This is your total monthly debt compared to your total monthly income. Its looked at to determine whether you can afford a monthly mortgage payment. Car payments, student loans, credit card debt and child support all fall under debt thatll come under consideration. You can find your percentage by calculating your monthly liabilities and dividing by your gross monthly income.
Down payment savings is another factor for loan qualification. The norm is 20% of the home purchase price, but certain programs, such as VA loans and FHA loans come with low or no down payment requirement. For those who dont qualify for a government-backed mortgage loan, youll need private mortgage insurance if you put less than 20% down.
Why Should I Use Rocket Mortgage
Rocket Mortgage® lets you work at your own pace, while providing award-winning customer service and expert advice. It lets you apply online, anytime, at your convenience which means its there when you need a fast approval to buy a house or a way to lock your rate when rates drop.
If youre buying a home, heres when we recommend using Rocket Mortgage®:
- Youre just starting your home search.
- You have a home in mind and want to make an offer.
- You already have a signed purchase agreement.
If youre refinancing, heres when you can use Rocket Mortgage®:
- You need to get cash out of your home.
- You want to lower your monthly payment.
- Youre interested in shortening your loan term.
If youre just trying to find out what you can afford, we recommend using our Home Affordability Tool.
If youre thinking about refinancing and are just looking for payment estimates, check out our Refinance Calculator.
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Rocket Mortgage Reviews And Complaints
As of September 2021, Rocket Mortgage has a 3.8 out of 5 star rating from Trustpilot based on more than 3,413 reviews. Most customers speak highly of its speedy application process and responsive customer service. The poor reviews mostly center around refinance applications and frustrations with the pace of the application process.
Rocket Mortgage has been accredited with the Better Business Bureau since 1986 and has an A+ rating as of September 2021. Of the 1,736 BBB customer reviews, Rocket Mortgage has earned a 3.11 out of 5 stars. While most reviewers have good things to say, some borrowers warn of poor account communication among loan officers and report submitting the same documentation multiple times as a result. Rocket has closed 631 customer complaints over the last three years.
The Basics Of Usda Guaranteed Home Loans
USDA guaranteed loans help fund rural development across the country. And as home prices continue to increase in major cities, families make the choice to live in the suburbs or rural areas.
In addition to the following overview, we also published a more in-depth guide to USDA loans which highlights their range of loan and grant programs. The following article covers section 502 of the USDA Guaranteed Loan Program.
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What Type Of Homes Qualify For Usda Loans
In order to get a USDA loan, the property the loan funds must serve as your primary residence. It cannot be an investment property, farm, vacation home, second home or a home you rent out. Eligible properties can have whats considered income-producing type buildings, such as a silo or barn, but they must not be used for commercial purposes.
The home must also be located in a USDA-approved area, which typically is outside of a city or other metropolitan area and has a smaller population. Some suburbs may be included as well.
Upon appraisal, the home must also meet certain guidelines set by the USDA. These include: a structurally sound foundation, good roof, easy access from a road, functional heating and cooling, electrical and plumbing systems and adequate well and septic systems, if present.
There are several types of homes you can get with a USDA loan, as long as they meet the aforementioned eligibility requirements. These homes include: new construction and preexisting homes, manufactured homes, short sales, condos, townhouses and foreclosure homes.
Usda Loans Have Been Cheaper Since 2016
On October 1, 2016, USDA reduced its monthly fee from 0.50% to 0.35%. Your monthly cost equals your loan amount or remaining principal balance, multiplied by 0.35%, divided by 12.
Additionally, the upfront fee fell from 2.75% to just 1.00%. This is a good opportunity for home buyers to get lower monthly payments with this loan program.
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Is Rocket Mortgage The Best Lender For You
Rocket Mortgage is one of the most popular mortgage companies in the U.S. Thats probably because it has stellar customer service reviews and a whole host of great online tools.
In other words, if you want to get a mortgage quickly and easily, Rocket is worth a look.
Just keep in mind that rates from any single company arent competitive for everyone.
Compare a Loan Estimate from Rocket Mortgage with a few other companies to be sure youre getting the best possible deal.
The Bottom Line: With A Usda Loan Closing Costs Are Not An Obstacle To Homeownership
USDA loans provide rural home buyers with an affordable way to purchase a home. However, they do still come with some costs. As you begin taking the steps to buying a home, its important to understand what that process entails and how you need to prepare financially for it. Our Learning Center has the answers you need as you prepare to embark on your home buying journey.
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How To Find Usda Homes For Sale
Now that you know more about what to look for, you can search listing sites with better filters in place. You may want to work with a real estate agent who is well-versed in USDA properties and can help you find the best one for your needs. Once you find a home you love that you believe meets all the requirements, you can check to see if it is in an eligible area by entering the address on the USDA property eligibility map. It is best to begin your home search after you are preapproved for a loan. That way, youll know that you can secure funding to buy the home and understand how much home you can afford so you can budget accordingly.
Keep in mind that the final determination of whether the home is an eligible property will be made by the USDA Rural Development department once it receives your application.
Whats The Difference Between A Construction Loan And A Land Loan
A construction loan is a type of short-term land loan intended to provide borrowers with the money to buy land and build a house. These loans are sometimes set up to convert from a construction loan to a regular or permanent mortgage loan after the home is built. Construction loans have terms of around 1 year, after which the owner must either convert their loan to a mortgage or apply for one. These loans are intended for borrowers that are ready to build right away. Regular land loans, on the other hand, are better suited for borrowers that dont have immediate plans to build.
Rocket Mortgage doesnt offer construction loans at this time.
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Eligible Areas And Properties
USDA loans were designed to help develop affordable housing in rural areas. USDA loans are not available in or around large, populated areas.
Fortunately, most of the country qualifies to get a mortgage under this loan program. You can check area eligibility by putting an address into the USDA eligibility map. If youre looking to buy in an area thats not marked by the color orange, you may be eligible for a USDA loan.
Eligibility for a USDA loan depends not only on location, but on the type of property as well. For a property to be USDA-eligible, it cant include a working farm. Additionally, USDA loans can only be used to purchase a single-unit primary residence.
No Down Payment Required
For many home buyers, especially first-time home buyers, saving enough for a down payment can be a major obstacle to homeownership.
With a USDA loan, the down payment isnt a problem because down payments arent required. Youre still responsible for closing costs, but you can have the costs folded into your mortgage loan.
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Weigh The Pros And Cons
Besides the benefits, consider the disadvantages of choosing a USDA loan. Since you can only finance a house in a USDA rural area, this option may not suite you. If you work in the city, living too far out may not be a practical choice. Commuting to work daily takes a lot time, money, and energy that you might not have.
Next, income limits may keep you from qualifying for this type of mortgage. If your household earns more than 115% of the median income in your area, you wont be approved. You should also think of the annual guarantee fee, which is an extra cost you must budget into your mortgage payments.
USDA loans only apply to single family homes. It should also be a primary home, which means you cannot finance an investment property if youre planning to rent out a house. These loans also follow minimum property standards to ensure the home is livable and safe. If you intend to purchase a house that requires a lot of renovation, a strict appraiser might not readily approve your home.
Before you choose a USDA loan, check if any of these factors might not align with your priorities and needs.
Tips For Choosing The Right Lender
- While interest rates might seem like the most pressing factor when picking a mortgage lender, that shouldn’t be your only consideration. For example, the closing costs and other fees associated with a particular lender are possibly just as important, as they paint a clearer picture of what your actual costs will be.
- A mortgage has a long lasting effect on your financial life, as its terms typically last anywhere from 10 to 30 years. In order to make sure that this doesn’t hamstring you, a financial advisor might be your best choice. The SmartAsset financial advisor matching tool can pair you with advisors in your area, based on your answers to a few simple questions about your situation.
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Disadvantages Of Usda Loans
There are certain drawbacks to USDA loans that borrowers may not encounter with conventional mortgages or mortgages through other government programs such as FHA and VA. These include:
- Geographical requirements: Homes must be located in an eligible rural area with a population of 35,000 or less. Also, the home cannot be designed for income-producing activities, which could rule out certain rural properties.
- Second property/vacation homes not allowed: The property must be used as the borrowers primary residence.
- Income limits: Borrowers must meet specific income requirements based on where they live. If you exceed the income limits, you will not qualify for a USDA loan.
- USDA up-front fee: Borrowers must pay an up-front fee for a USDA guaranteed loan or have that fee rolled into the mortgage loan amount. Depending on that loan amount, this could be several thousand dollars.
- Streamlined refinancing limitations: To qualify for a refinance, you must have a record of 12 consecutive, on-time mortgage payments, and the home must be your primary residence. This program only applies to mortgages with 30-year terms and is not available in all states.
Pros And Cons Of Rocket Mortgage
Pros
- Instant verification. Find out how much you might qualify for in minutes. Get a quote minutes after you apply online.
- Fully online process. Unlike other loans, Rocket Mortgages convenient application, verification, documentation and funding take place online.
- No prepayment fees. You can pay your loan off early without prepayment fees or penalties.
- Fast turnaround. Rocket Mortgage suggests that most of its borrowers close their loan within a week of having their application approved.
Cons
- Application deposit. Youll need to put down a deposit to apply, and the deposit goes towards closing costs if you seal the deal on your new Rocket Mortgage home loan.
- Not all loan types are available. You cant get a USDA-backed loan, a construction loan or a mobile home mortgage through Rocket Mortgage.
- Hard credit inquiry. Applying for a mortgage loan includes a hard credit inquiry, which can lower your credit score.
Compare Rocket Mortgage to other lenders
I worked with a mortgage broker to buy my first home, and he found that Rocket Mortgage through Quicken Loans offered the lowest interest rate and best terms for my situation. Because I was a freelancer, my tax and employment documents were a bit more confusing than the average borrower. So, had I not worked with a broker, I would have had a tough time understanding the submission process.
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How Rocket Mortgage Stacks Up
Quicken Loans, which powers Rocket Mortgage, is the overall largest online retail mortgage lender. With that size comes a number of mortgage and refinance options that help homebuyers with low credit scores or low income. Thats advantageous if youre looking for a company with a wide range of loan options. You can also find specialized loans such as VA and FHA, which are great options for certain customers.
Compared to its online competitors, such as Better.com, a mortgage startup, Rocket Mortgage has some of the most diverse offerings. For example, Better.com, while offering online preapproval and loan applications, doesnt offer VA or USDA loans. That means if you dont have a excellent credit score, or are looking to use government loan options, youre out of luck.
However, Rocket Mortgage doesnt look as good when compared to a full retail bank, such as Truist or PNC . These banks offer checking, savings and retirement products alongside mortgages, which is attractive if youre trying to keep all your finances in one spot.
Additionally, many big banks include home equity loans and home equity lines of credit as customer options, which Rocket Mortgage and Quicken Loans doesnt offer. Finally, although a representative stated that Quicken Loans is starting to offer USDA loans, you wont find that option on Rocket Mortgage. Rural homebuyers will have to look elsewhere for that product offering.
How Does A Usda Loan Work
USDA loans loans and Federal Housing Administration loans) are mortgage loans that are backed by the U.S. government. While they work like any other kind of mortgage loan, USDA loans have unique benefits and eligibility requirements.
MoneyFact
Unlike FHA or VA loans that offer 15- or 30-year terms and adjustable-rate mortgage options, USDA loans only offer 30-year fixed-rate mortgages.
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What States Offer The Usda Streamline Refinance Program
The USDA Streamline refinance program started in 2012 as a pilot in several states. However, it quickly proved to be a success and created outcomes correlating with homeownership stability. As such, the program has expanded nationwide.
The only location requirement is that you be in an area that would normally be USDA eligible, typically on the outskirts of suburbia or in a rural area far away from major population centers.
How Much Are Closing Costs For Usda Loans
USDA loans come with a lot of benefits, but they also have some costs associated with them. Like nearly every other type of home loan, youll be required to pay closing costs. These costs can be anywhere from 3% 6% of the loan value.
The closing costs are made up of many different items, including the following:
- Origination fees
- Well, septic and termite inspection
- Discount points
There are several options available for paying closing costs. Its possible that you may be able to roll the costs into your loan amount. If the seller is motivated, they may also agree to pay a portion or all of the costs themselves. However, this is usually more of an option when the housing market is slow compared to when homes are selling quickly.
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