If there’s one myth that surrounds USDA Guaranteed Loans, it is that they take forever to close. Even if this was the case in the past, it is no longer. How long it takes to get a USDA loan approved depends on several factors. One of those factors is how fast you act. If you don’t provide the documents the lender needs quickly, yes it could take longer to close. But, this is the case for any loan, not just the USDA loan.
Why USDA Loans Might Take Longer
There is one reason USDA loans might take longer than other loans to close. It’s because the USDA must approve the loan. Unlike FHA or VA loans, the lender doesn’t have final say on the approval. The FHA or VA doesn’t require the lender to send them a full package for approval. The USDA, however, does require this. The time it takes for the USDA to approve the loan could slow the process down. But it is usually only very slightly. Generally, the USDA is on the ball and only takes a week or so to approve the loan.
Of course, how long the USDA takes depends on what the lender sends them. They must send a complete package. This means everything that is necessary to approve the loan. An approved USDA lender knows what the USDA needs. If a lender sends an incomplete package, the USDA will not approve the loan. This could slow things down. But, this has nothing to do with the USDA itself.
Going Through Underwriting
The underwriting process for the USDA loan is just like any other loan. You must provide the lender with the following documents:
- Income docs, such as paystubs, W-2s, or tax returns
- Asset statements
- Proof of employment
- Personal information so the lender can pull your credit
- Purchase contract
Of course, every lender requires different documents. Your situation also dictates what the lender needs. For example, in some cases you may need to provide tax returns even though you work for a company. If you make bonuses or have inconsistent income, a lender may want to see your full tax returns to see your true income.
How fast you provide what the lender needs dictates how long the process takes. Providing lenders with a full package right away will help move things along. If they do need additional information, make sure to react quickly. Remember to provide things like all pages of your asset statements or all tax schedules will help to keep things running smoothly.
Getting Through the Appraisal Process
Another thing that can hold up the USDA process is the appraisal. You must wait for the appraiser to view the property and then write up the report. The USDA does require that the home is safe and sanitary. If there are serious issues, the lender may require the seller to fix them in order to close on the loan. This could delay the process slightly. But, this has nothing to do with the USDA’s speed. It has to do with the appraiser and possibly the seller.
Speeding Things Along
There are ways you can speed things along. First, you could get a pre-approval. This lets you know if you even qualify for the USDA loan. The lender will do a preliminary evaluation of your income documentation to determine your eligibility. This way when you find a home, you already did most of the work.
The other way is to stay in close contact with your lender. If you don’t hear from your loan officer for a few days, check in. See if there is anything they might need. The more you provide, the easier it is for them to underwrite the loan properly. This way they can send a full package to the USDA.
In the end, the USDA loan might take an extra week to get approved, but not much longer than that. You can always ask your local USDA office how behind they are at any given time. This way you will know the turnaround time and what to expect. The USDA is a very successful program that helps low income families purchase a rural home. Don’t overlook this program if you are eligible for it!