How long a USDA loan approval takes varies from state to state and how your file is prepared and processed. If loans aren’t approved after a few days most people tend to worry and conclude that they did something wrong or missed a few USDA loan requirements during their application.
Sometimes this isn’t always the case, so we’ve found it necessary to explain the driving factors for a quick USDA loan approval and things you should never do when applying for this type of loan.
This article isn’t only for people who have already sent in their application and are waiting on replies but for those who have just started the process and want to ensure they’re getting all the steps right.
Can You Get Pre-Approved For a USDA Loan?
Yes, you can get pre-approved for a USDA loan.
You have to do this before you jump straight into the actual application process. Pre-qualification and pre-approval should always be the first step toward getting your USDA loan.
Pre-qualification is essential to identify possible issues you may run into during the actual USDA loan application process, it helps buyers understand how much they can afford in terms of acquiring a loan i.e your purchasing power.
If you pass the pre-qualification and approval stage, you receive a credit approval letter which realtors and homeowners usually require before they let you write up a contract for a home you plan on purchasing. This letter is valid for only 45-90 days so you have to start your application proper within that time frame.
How To Get Pre-Approved For a USDA Home Loan
Getting pre-approved shouldn’t take up to an hour, it simply involves documents and figures checking. Lenders usually just verify all the information you provided in your pre-qualification stage. To ensure you get pre-approved you should take the following steps:
- Find verified USDA lenders: The most important step is to choose lenders who are trained and understand the actual requirements to get a USDA loan. You can compare them by credit score rates and state availability but once you finally settle on one, be ready to provide the necessary information.
- Submit your information: Your lender will want to verify your documents and ask questions based on USDA’s eligibility requirements.
You should expect to be asked questions relating to your; credit score, household income limits, debt-to-income ratio (DTI), employment history, and loan-to-value ratio (LTV). All these terms have set values that must not be exceeded for you to qualify for the USDA loan.
- Wait for feedback: After you’ve submitted all your information to your lender and provided all the answers to the required questions, you’ll have to give them time to thoroughly vet your documents.
- Receive your pre-application decision: Once the lender is done verifying all your information, you’ll receive a letter that contains the final decision. If you’ve qualified the letter will show you’ve passed this stage and can further your application by searching for homes.
However, if your application is rejected you’ll need to re-apply (maybe even consider an FHA loan), this can be with the same lender or you might want to try a lender with different requirements. Your lender will tell you the reason(s) you weren’t approved for the loan and you can try to re-apply after you’ve resolved the pending issues.
How Long Does It Take To Close a USDA Loan?
After you’ve gotten your pre-approval letter and found the home you’d like to purchase, signed the necessary documents, and have been cleared by the mortgage company of choice, your loan request is sent to the local USDA Rural Development office for the final loan commitment. These steps can take about 2-3 weeks.
When the loan file is cleared by the USDA it is sent back to your lenders with the final loan commitment and closing usually happens 3 days after this. Therefore, the time it takes to close a USDA loan after a purchase contract is approximately 4-5 weeks.
Can You Check the Status of Your USDA Loan?
If you’ve filed for a USDA loan and your lender isn’t communicating effectively, you can always check on the status of your loan online. You can visit USDA’s website to access your loan information. Their customer service will provide you with any information you need to know concerning your loan status.
USDA Home Loan Underwriting Guidelines
The guaranteed underwriting system (GUS) was created by the USDA to serve as an automated underwriting system for lenders to submit and process loan application requests online.
It helps lenders make an informed decision about your loan application and eliminates human error. Here’s how it works:
- Credential upload: The lender uploads all the necessary credentials into the GUS system and any additional information that could be useful. The details entered into the system must be correct to avoid a USDA loan decline.
- Determine borrower’s credit score: After all the information has been uploaded, the system takes the borrower’s credit score and compares it to its eligibility guidelines to determine the creditworthiness of the borrower.
- Scorecard rating: GUS will issue a scorecard rating from the system to determine if the lender should, “accept”, “refer” or “refer with caution”.
- Final underwriting decision: Other factors are taken into consideration and the final underwriting decision is then provided by The GUS system for the lender to work with.
Important Points to Take Home
One major factor people get wrong during their loan approval is choosing non-USDA-approved lenders.
USDA-approved lenders can work directly with realtors, homebuyers, and the USDA field office. This means there’s no third party involved in submitting your documents and less waiting time. They will handle all the steps:
- Pre-qualification
- Loan application
- Onsite underwriting
- Loan approval
- Submitting the file to USDA
- Ordering closing documents and
- Loan funding
All this control allows them to save time where possible and keep both parties on the same page. Third-party lenders do not have this ability and usually have to wait for feedback from the USDA-approved lenders they submit your file to. This can cause a delay and is sometimes the cause of long waiting periods for USDA loan approval. With USDA construction loans, it’s sometimes even longer.
Frequently Asked Questions
How Long Does a USDA Direct Loan Take?
The 502 Direct Loan takes between 30-60 days to finalize. This includes pre-approval, mortgage clearance, and closing on the house. Your lender should be able to provide an estimated timeframe for all these steps.
How Long Does Underwriting Take for a USDA loan?
Under normal conditions, the initial underwriting approval should occur within 72 hours of the first USDA loan file submission. However, if a hindrance is encountered along the line, this process could take up to a month.
How Long Does it Take USDA to Review a Loan?
The time it takes USDA to review a loan is called the USDA closing turn time. This usually takes around 1-7 business days to complete. After this stage is complete, the borrowers can then close on their house.
How Does This Apply When it Comes to Refinancing?
The time is takes to refinance with USDA is quicker since there is already an existing USDA loan.
