USDA Home Loans: Asset and Income Documentation

What You Will Need

So, you’ve decided to go through with a USDA Home Loan. You’ve found the home of your dreams, and it resides within the eligibility criteria set forth by the USDA. What should you expect to have to make this process as easy and seamless as possible? Are you worried about what documents you’ll need to submit or how many paystubs you’ll need? In this blog, we’ll give some tips to help you go through the mortgage process as effortlessly as possible. While the mortgage loan process may seem daunting at first glance, we promise that it’s not as intimidating as you might think when it comes to USDA Home Loan Documents!

 

Asset Documentation: Overview And Bank Statements

In order to submit your file to the underwriter, you will need to provide the following USDA Home Loan Asset Documents: Bank statements and 401K or IRA statements. For bank statements, the underwriter requires the most recent 2 months or 60 days of bank statements to get an idea of money-spending practices and to identify any additional sources of income. Specifically for USDA, if there are any large deposits or several deposits, these will need to be sourced and explained with a large deposit letter of explanation and a copy of the source of the deposits. An example of a source for a large deposit can be a check copy, an invoice for work done, or a pay stub from work. The large deposit letter of explanation will need to explain exactly where the deposit came from, the date it was deposited as well as a clear indication as to whether or not it’s a source of income or a one-time deposit. This letter will also need to be signed and dated in pen by you.

 

Asset Documentation: What if I have 401K and IRA Statements?

For 401K and IRA Statements, these are typically only needed to show total assets and the possibility of reserves. If you’re submitting these documents, the underwriter will also require you to provide all pages of your terms and conditions of withdrawal. This information is usually found in the Plan Summary sent to you by your 401K or IRA account provider and the underwriter will need all pages of this document. While 401K or IRA accounts are optional, most borrowers will provide these accounts to show they can withdraw money during hardships to have reserves or to show a down payment for the home.

 

Income Documentation: Pay Stubs, Invoices, W2s and 1099s!

The primary way of showing the source of income is through pay stubs, invoices, W-2 forms and 1099 forms. The underwriter requires at least 30 days of pay stubs for multiple reasons: to confirm income reported by the borrower as well as to confirm the deductions. If you provide pay stubs which shows a deduction for child support, for example, the underwriter will need you to provide full documentation to support this. This includes divorce decrees that outline the terms of child support. If you are receiving child support, the underwriter will need the above and a year’s proof that you’re receiving child support to count it as income. You can typically request your divorce decree from your attorney, and the proof of income can come from the specific website from the state that shows child support payments. While there are some other one-off situations, where sourcing may be impossible, these can usually be overlooked with a proper letter of explanation. An example of this can be deposits from tips from working in a restaurant-type setting. If you have your own business, the underwriter will cross-reference the following items to show income: your 2 most recent tax returns, profit and loss statements, balance sheets, and 1099s.

While it may seem like a lot to acquire these USDA Home Loan Income Documents, most of this information is easily obtained from your employer. We recommend being prepared to explain most deposits that are not shown as payroll, and any extenuating situations as soon as you can, as this will prevent many additional stipulations from the underwriter on a conditional approval!

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Why You Should Choose A USDA Renovation Loan

USDA Renovation Loans

If you’re thinking about purchasing a new home through the USDA Loan Program, you may have other options! While you can easily just buy a home that is not in need of any repairs, the USDA Renovation Loan Program allows you to add a few more possibilities for purchasing homes, as long as they are in an eligible rural location. Unlike other loan programs, the USDA Loan Program has an eligibility criteria for homes based on location. The USDA Loan Program, however, allows lower income borrowers the flexibility to add more possible homes to their shopping list, all while keeping them very affordable.

USDA Renovation Loan Advantages: The Loan is Government Guaranteed!

Purchasing a fixer upper home through the USDA Renovation Loan Program offers plenty of benefits. One of the main benefits is the fact that the USDA Renovation Loan Program will roll in the costs of repair in the home being purchased, and that these renovations must be made before the sale of the home is finalized at the closing table. Because the USDA Renovation Loan Program is a government backed loan, these homes must also pass sanitary and safety regulations set by the U.S. Department of Agriculture in the most recent HUD Handbook before the home can be sold. This guarantees that you will be receiving a home with all the required work done prior to purchase and will also have a fully renovated and safe place to start a new life with your family.

The USDA Renovation Loan Program Will Save You Money!

Another benefit to choosing the USDA Renovation Loan Program and purchasing a home that needs renovations is the fact that the costs of repair are rolled into the mortgage. While this initially sounds like it would cost more money, the initial purchase price of homes that need repair are usually much lower than turnkey homes on the market. This is because the owner is willing to sell the home “as is,” while not wishing to be responsible for any repairs that are needed. Luckily, the repairs can be remedied while the additional costs are being rolled into the mortgage, resulting in a cost-efficient way to upgrade either a kitchen, bathroom, or patio!

Put Money Into Your Pocket With Instant Equity!

Did you know that upgrading your kitchen, bathroom, or any other living space can increase the value of your home? By upgrading these features, you are instantly adding appreciation to your home before you even purchase it. This would be a very cost efficient way to get the most out of a possible cash-out refinance later on down the road, putting even more money back into your pocket upon completing an appraisal to determine your home’s new value. Alternatively, if you’re looking to eventually purchase a new house altogether, selling your previous home that now has additional features and upgrades will increase the selling price as well. Not only do you save money by choosing to purchase your home with a USDA Renovation loan, but you also make money in equity after the renovations are completed! And even more, you are paying yourself to upgrade your home while also giving it your own personal flair!

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Why a FHA 203K Renovation Loan May Be Right For You

Fixer Upper Mortgage: FHA 203K Loans

If you’re thinking about purchasing a new home through the FHA Loan Program, be sure to fully explore your options! While you can easily just buy a home that is not in need of any repairs, the FHA Renovation Loan Program allows you, as a borrower, to have a few more options for purchasing homes in any location. Unlike the USDA Loan Programs, which require the home to be in a rural location, the FHA Loan Program has no restriction on area. The FHA Loan Program allows borrowers the flexibility to add more possible homes to their shopping list, all while keeping them very affordable.

 

FHA 203K Advantages: Government Backed Loan

Purchasing a home that needs repair offers plenty of benefits. One of the main benefits is the fact that the FHA 203K Loan Program will roll in the costs of renovation in the home being purchased, and that these renovations must be made before the sale of the home is finalized at the closing table. Because the FHA 203K Loan Program is a government backed loan, these homes must also pass sanitary and safety regulations set by the Federal Housing Administration before they can be sold. This guarantees that you will be receiving a home with all the required work done prior to purchase and will have a fully renovated and safe place to start a new life of homeownership.

 

Renovating Is Very Cost Efficient!

Another benefit to choosing the FHA 203K Loan Program and purchasing a home that needs renovations is the fact that the costs of repair are rolled into the mortgage. While this initially sounds like it would cost more money, the initial purchase price of homes that need repair are usually much lower than turnkey homes on the market. This is because the owner is willing to sell the home “as is,” while not wishing to be responsible for any repairs that are needed. Luckily, the repairs can be taken care of while the additional costs are being rolled into the loan, benefiting you as the home buyer!

 

You Can Pay Your Future Self By Adding Your Personal Flair!

Another one of the biggest advantages is the fact you are adding value to your home before you even purchase it. By upgrading multiple areas like bathrooms, kitchens, decks or patios, you are adding those enhancements to your home. This would be a very strategic way to get the most out of a possible cash-out refinance later on down the road, putting even more money back into your pocket upon receiving a favorable appraisal to determine your home’s new value. Alternatively, if you’re looking to eventually purchase a new house altogether, selling your previous home that now has recent upgrades will increase the selling price as well. Not only do you save money by choosing to purchase your home with a FHA 203K loan, but you also make money in equity after the renovations are completed! And even more, you are paying yourself to upgrade your home to your liking!

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Why a Home Renovation Loan May Be Right For You

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If you are looking for a home, a home renovation loan may be a better choice and also more cost-efficient than buying a home that is turnkey ready. A home renovation loan is a mortgage in which the cost of repairs are rolled into the loan itself. The most popular loan programs that have this ability are the FHA Loan Programs, also known as FHA 203k, The USDA Renovation Loan Program, and the VA Renovation Loan Program.

There are several reasons why this loan-type is advantageous. You have the ability to upgrade your home in a very cost-efficient way, you can add your own personal style with those renovations, and you can also add instant equity to the home before you even purchase! So not only do you pay less for a home that has the upgrades you may want, but you also pay yourself in equity by personalizing your home!

Homes That Need Renovations Are Cheaper

One of the biggest benefits is that homes that need renovations are usually priced lower on the market. If a home buyer is looking for a home that fits their budget but also wishes to save a bit of money getting the quality of home they want, this is one of the better options. For example, being able to renovate an outdated worn-down kitchen to an upgraded kitchen while rolling in the costs into the mortgage more often than not results in a purchase price lower than a home that has the upgraded kitchen already in the home.

You Can Add Personality To Your New Home

Another advantage to renovating a home and rolling the costs of it into your mortgage loan is the fact that you can add some personal flair to your home without necessarily having to rebuild the entire home. Finding a home that may need a few repairs allows the buyer to make the choice of how they would like those items repaired. A run-down kitchen with soapstone countertops not your thing? Roll in the costs of beautiful granite countertops to give your kitchen that modern look instead. Bring out your personality by renovating and upgrading the way you want!

Instant Equity: Money In Your Pocket Later On!

One of the biggest advantages is the fact you are adding value to your home before you even purchase it. By upgrading core areas like bathrooms, kitchens, decks or patios, you are adding those amenities to your home. This would be a very strategic way to get the most out of a possible cash-out refinance later on down the road, putting even more money back into your pocket upon receiving a favorable appraisal to determine your home’s new value. Alternatively, if you’re looking to upgrade into a new house altogether, selling your previous home that now has recent upgrades will increase the selling price as well. Not only do you save money making the purchase to begin with, but you also make money in equity after the renovations are complete!

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