USDA Loan Processing Priority Criteria

USDA loans are mortgages backed by the United States Department of Agriculture to help individuals with low to moderate incomes, buy, repair or renovate homes in rural areas. People who are eligible for USDA loans get several benefits, such as 100 percent financing with no down payment, and below-market interest rates. Though an applicant may be eligible for the loan, due to insufficient funding, they may still not get approval. In such cases, a priority system is used to determine the order in which the applications are processed. Here we take a closer look at the order in which applications are prioritized in case of insufficient loans.

Processing Priorities

If enough funds are not available to fund all the applications, the loans are processed on the basis of a priority system. The system ensures that applicants meeting the priorities for the program get the first preference. The time that will be required to get the funding depends on the duration of conducting the required verifications and the time taken to find a property. There are four different types of priorities considered when processing the loan. These are:

  • Subsequent loans to Improve health and safety hazards:

    Borrowers who request subsequent loans to improve health or safety hazards are given first priority.

  • Transfer of Agency Financed Property:

    The second priority is given to applicants who need the loan for purposes that are of the interest of the agency. These loans are for sale of Real Estate Owned property and transfer or assumption of property owned by a program borrower.

  • Hardships:

    The third priority is given to candidates who face housing related hardships. Living in deficient housing that lacks complete plumbing, heating, overcrowded or is structurally unsound get the third priority.

  • Loans that provide additional resources:

    Applicants who contribute sweat equity through agency-approved Mutual Self-Help project receive fourth priority.

Veteran’s Preference

In case veterans with equal priority status apply for the loan on the same day, applications that qualify for a veteran’s preference receive priority processing. Veterans discharged from active forces of the United States Army, Navy, Coast Guard, Marine Corps, Navy or Air Force are eligible for veteran’s preference. In addition, veterans who served in active duty any of the time periods mentioned below are eligible for veteran’s preference. The time periods consist of:

  • April 6, 1917 through March 31, 1921

  • December 7, 1941 through December 31, 1946

  • June 27, 1950 through January 31, 1955

  • A period of more than 180 days, any part of which occurred after January 31, 1955, but no later than May 7, 1975

  • August 2, 1990 through January 2, 1992

  • Any other prescribed by Presidential proclamation or law

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