USDA Loans: Direct vs Guaranteed - YouTube

If you're looking to buy a home in the country then USDA

can be a great option if you qualify. But should you apply for a USDA guaranteed

loan or a USDA direct loan? What's the difference? That's

what we're talking about today, so let's go.

Hi everyone and welcome back to my channel. I'm Bryn Cook and I'm a real

estate agent here in Eugene, Oregon. Today we're talking about USDA loans and

the difference between USDA guaranteed and USDA direct. Now I don't pretend to

be a lender, so you'll want to make sure that you

reach out to your own lender with specific questions when it comes to your

loan needs. But I do have a lending background and I

have recent experience helping clients in real estate buy

country property. I've closed both USDA guaranteed deals

and am currently working on a deal that is USDA direct.

There are some significant differences that you should be aware of

when applying for this type of loan. So let's start out by discussing what

a USDA loan is in general. USDA stands for United States Department of

Agriculture. Home loans through the USDA help people

with low to moderate-income by offering affordable payments on homes

in rural areas throughout the United States with no

money down. The loan guidelines are pretty similar

whether your loan goes directly through the USDA

where the USDA acts as the lender or is held with the USDA

approved private lender and is guaranteed by the USDA.

Now I'm going to keep the differences between direct

and guaranteed USDA loans at a high level and not get into the details when

it comes to income, the property, or credit requirements in

general. USDA works for buyers who have low debt,

low to moderate-income, and good credit. The specific

requirements are relatively easy to find with some

research online or by calling your local USDA approved lender.

What I am going to share with you is the experience that my clients have had with

each type of USDA loan when trying to get their offers accepted

and the experience during the escrow process.

First, let's start with the approval process. In general the approval is

faster with the USDA guaranteed program. You are primarily dependent on the

private lender's timelines for underwriting

with usda reviewing the file at the end of the transaction

to make sure that everything fits within the usda guidelines

and to make sure that they will guarantee the funds at the time of

closing. It's basically the same process as any

other loan with the exception of the additional time added for the USDA file

review. That final review can take anywhere from

a few days to a few weeks depending on how

backed up the USDA underwriters are. As far as the USDA direct goes,

they do the full approval for the buyer up front.

That process can take weeks to months depending on how many loans are inline

and the government funding for the program. If the funds run out while

you're waiting for approval, then you may need to wait until the

program is replenished in order to move forward with your home purchase.

Now the advantage to the buyer with the direct program is that the costs for the

direct program tend to be lower than the guaranteed program

and the direct program provides payment assistance

in the form of a subsidy. That can make the difference between being able to

qualify for a home loan or not. USDA direct may be the only option for

lower-income buyers. Once you're approved for the USDA

direct loan and find a seller willing to accept the terms,

then it takes another 45 to 60 days to get through the escrow process.

The other main difference from the process perspective is that the USDA

direct requires a copy of the home inspection

so that they can request needed repairs on the home. In the

majority of other loan programs, the home inspection

isn't something that the lender reviews. The inspection is strictly for the

buyer's purposes and provides the information about the house

in order to ensure that the buyer feels comfortable moving forward with the

purchase. Whether repairs are requested is

typically up to the buyer or the appraiser in some cases. Having to

send the inspection to the lender may be something that the sellers aren't

comfortable with when reviewing your offer.

It's important that you understand the differences in the programs when

applying for either type of usda loan or reviewing offers on the sale of your

home. If you found this information helpful,

you may want to check out my playlist on the home buying process in general.

Feel free to contact me with questions. I work hard to stay connected.

I'd love to have you subscribe to my channel and join me for my next video.

Thanks so much for watching.