If you are in the market to purchase a rural home, you have two options: a home that is for sale by owner/realtor or a home that the government owns. USDA foreclosed homes are the homes that the government owns. They are the loans that previous homeowners defaulted on their USDA loans and the government took possession of them. They are also the homes that the government is trying to get rid of so that they can recoup their investment in order to guarantee future USDA loans. Purchasing a foreclosed USDA home works much the same as purchasing a VA or FHA foreclosed home and is a lengthy process.
Locating the Right Property
The first step in purchasing a USDA foreclosed home is to find the one that is right for you. Finding information about the houses that are available can be a little tricky. The best place to start is the USDA website where they list the properties that are in foreclosure. Once you have the list, you can read the housing descriptions available on the website. From there, it is recommended that you contact the local USDA office that is listed on the housing description to get more details, including the sale date for the home. Every office has their own requirements, so contacting the office handling the case is the best option for success.
Bidding on the Home
If you decide you would like to purchase a foreclosure USDA home, you will have to attend the sale for the home. This is an auction type sale that occurs on a specific date. They usually occur in person but are sometimes held online as well. If you attend a live auction, you will be there with other potential buyers wishing to bid on the home as well. Generally, with USDA foreclosed homes, the highest bidder wins the bid. When you attend a sale, you should plan to pay for the home as instructed if you were to win the bid. The regional USDA office handling the sale will be able to tell you the amount of money you need to bring in the form of a cashier’s check or money order to get the bid as it is a percentage of the purchase price of the home.
Every home sale works a little differently, so it is important to get in touch with the Field Office to make sure you know all of the details. Most homes are sold “as is” which means you get them in the condition they are in. Some offices allow a walkthrough of the home a week or two before the auction, so make sure you know the details of the sale to see if this is an option for you.
Obtaining Financing for USDA Foreclosed Homes
Once you win the bid, you have to secure financing for the USDA foreclosed homes. USDA financing is fairly easy to obtain, especially if you already went through the pre-approval process, which is recommended in order to get the process moving along.
Obtaining a USDA loan is simple as long as you meet the income requirements. If you make too much money, USDA financing will not be an option, which is why getting pre-approved is a good idea. Once you know how much you can afford and that the USDA will provide financing, you can confidently bid on the property.
The USDA loan processing works much the same as any other loan. You have to provide income, employment, asset, and credit documentation to the lender. They will then determine if your credit score, debt ratios, and income qualifications meet the USDA requirements. Because the USDA loan is for lower income families, the guidelines are fairly reasonable, making it easy to qualify.
Once the loan goes through underwriting, an entire USDA package gets sent to the field office. This is when the USDA ensures that your income and credit qualifications meet the USDA requirements. Typically speaking, the minimum credit score approved for a USDA loan is 640, but if you have special circumstances, an underwriter can manually underwrite your loan.
Once the loan comes back from the USDA approved, you can close on the loan. At the closing, you will take possession of the title and have access to the property which is now yours!