It’s a common myth surrounding the USDA loan that it takes ‘forever’ to get to the closing. It really doesn’t take too much longer than any other loan on the market. While there is one extra step USDA lenders have to take, if they do their job right, it won’t take very long.
What’s Different About USDA Loans?
Most loan programs go through the lender and that’s it. Once the underwriter clears the loan to close, you are good to go. With USDA loans, there is one-step the lender must take after the underwriter clears the loan to close. The lender must send a complete underwriting package to the USDA for their final approval. If the USDA approves, it the file goes back to the lender and you are ready to close.
Moving Your USDA Loan Along the Process Faster
So what can you do to make sure that your USDA loan is good to go? Here are a few simple tips:
- Get a pre-approval – If you go through the pre-approval process, the actual underwriting on your loan won’t take as long. When you get pre-approved, lenders evaluate your income, assets, and credit score already. They then conditionally approve you for the loan. The conditions usually have to do with the property itself, which if you haven’t found one yet, you can’t satisfy. Once you do, the underwriting will go much smoother.
- Respond to the lender’s requests – Whether you are in the pre-approval stage or the actual underwriting stage, respond to what the lender needs. They often ask for extra paystubs, extra assets statements, or clarification on something in your file. The quicker you supply the information that they need, the faster you can get your loan to the USDA and closed.
- Provide a complete package – When you know you are ready to apply for a loan, provide the lender with almost everything they need right away. A full package includes paystubs for the last 30 days, W-2s for the past two years from all jobs, asset statements from the last two months with all pages included, and tax returns from the last two years with all schedules (if applicable.) If you provide all of this to the lender upfront, they will have fewer reasons to come back and ask you for more information.
Waiting on the Lender and USDA
Once you do your job, the rest is up to the lender and the USDA. Before you choose a lender, it’s a good idea to ask about their turnaround time. Naturally, some lenders are slower than others. Make sure you choose the lender that has a turnaround time that you can deal with rather than finding out after you’re in the process that they are slow moving.
Once the lender underwrites and approves your loan, the last thing you have to do is wait for the USDA. The waiting time will differ by area. Assuming that your lender sends in a full underwriting package, you’ll probably get your answer back from the USDA in a matter of a week or two. If the lender doesn’t provide a full package, though, you’ll be back at square one.
The USDA doesn’t process incomplete packages. Instead, they send it back to the lender and request a full package. This could add weeks onto your timeline as your lender puts the right information together and sends it back to the USDA. You’ll be in the back of the queue once again, which can lengthen the amount of time it takes to get to the closing.
You can do your part in getting your USDA loan closed fast by researching lenders and their turnaround time. You can also provide the lender with all of the information they need about your loan upfront. This way there isn’t’ a lot of back and forth and your lender can focus on getting your loan off to the USDA.