USDA Rural Development Mortgage Guidelines

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USDA Direct Loan

Guaranteed Mortgage Loan Process

The USDA guaranteed mortgage loan process for the is a little different for the lender but is very much the same for a broker or consumer.  USDA has two types of home loans: the Direct mortgage and the Guarantee mortgage.

Direct loans are made by USDA directly and usually/may involve subsidy and recapture. This program is know to have limited funds due to the subsidy.

The Guarantee loans are made by brokers and originators.  The loans are underwritten by USDA-Approved Lenders.  There is no subsidy available so obviously no recapture.  Budget Authority funds are much more plentiful so they are not likely to run out.

This website does not cover the Direct loan program, only the Guarantee mortgage.  The process is as follows.

  • The originator takes the application and determines if the applicant meets the guidelines and if the property is in a eligible area.
  • The package is processed by the broker and sent to the USDA-Approved Lender that underwrites it.  The lender then submits the underwritten package directly to the Rural Development's local office. (Lender must use the Origination Package Checklist)
  • The R.D. Official will review the package and issue a "Conditional Commitment for Guarantee" or they will express a need for additional information within 48 hours.
  • When the lender receives the Conditional Commitment they may close the loan subject to the conditions listed.
  • The Conditional Commitment is good for 90 days and may be extended once for another 90 days.  A request must be submitted.
  • When the loan is closed the lender uses the final submission check list and submits the closing package to R.D. alone with the guarantee fee.
  • R.D. reviews and issues the Loan Note Guarantee.

The forms you will need as a lender are downloadable from the RD website.  They are very short and simple forms found on page six (6).

If you are a consumer and applying for a guaranteed mortgage most of the things discussed here will be transparent to you.  Your loan is processed and underwritten just like any other mortgage and takes the same amount of time.



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