Housing options may be limited for felons recently out of prison, but there are resources available. At some point, felons may want to consider a house. Renting a house is one thing while buying a house is a different matter. One of the critical factors in buying a house is financing a mortgage. There are different loan programs available.
This blog post will cover the issue of whether or not a felon can qualify for a USDA Loan.
- What is a USDA Loan?
- USDA Loan Qualifications
- Why Are USDA Loans Good for Felons?
- Making Their Case for Getting a USDA Loan
What is a USDA Loan?
USDA stands for the United States Department of Agriculture. A USDA loan provides low-cost insured home mortgage loans with a variety of purchase options. The USDA offers mortgages for those wanting to buy a home with no down payment. Originally, USDA loans were considered “farm loans” and were intended for purchasing farmland. Today, properties in almost every area of the country outside major metropolitan areas can be purchased with a no-down-payment USDA home loan.
USDA Loan Qualifications
USDA loan qualifications state that no money is required as a down payment to purchase a home. This is the only program available in the U.S. that offers zero-down mortgages for those that are not military veterans. Also, USDA home loan rates are typically less than other home-loan rates.
Income and expenses will be considered for USDA home loan eligibility. To qualify, an individual’s monthly housing costs (mortgage payment principal and interest, property taxes, and homeowners insurance) cannot exceed 29% percent of the gross monthly income.
While there is no set maximum loan amount for USDA home loans, the borrower’s total monthly household income must be at or below the maximum allowed USDA income limits for the area in which the property is located.
Felons will be relieved to know that a criminal background check is not required. Most lenders do not conduct criminal background checks on mortgage applicants. However, they will obtain their credit report, verify their income, and verify their residency for the past 10 years.
The following are requirements for a USDA loan:
- Proof of employment for the past two years
- Credit score of at least 620
- Cannot have declared bankruptcy in the past three years
- Cannot be delinquent on any federal debt, including restitution
- Background check
The following documentation is required for USDA approval:
- Names and addresses of all employers plus pay stubs for the past month
- Divorce decree or child support agreement if paying or receiving child support
- Income tax forms for the past two years
- Asset statement for the past month
While these are easier qualifications than for a conventional loan, they still present major challenges for felons.
Why are USDA Loans Good for Felons?
Background checks on individuals applying for a USDA loan will evaluate the person’s credit history and credit score, verify the person’s current employment status, and verify the person’s identity. Criminal history is generally not considered when applying for a USDA mortgage.
When buying a house, this type of loan is good for felons who often don’t have enough money to qualify for a mortgage through other conventional programs. This typically occurs from being in prison with no job, no income, and an inability to pay their bills.
Families at home often struggle financially while felons are incarcerated, and bills mount up. This frequently results in filing for bankruptcy and financial instability when felons have completed their sentence.
Their credit score is often quite low as a result of these struggles. Felons have an unstable work history. They haven’t held a job in society since they were sentenced to prison. For felons in this situation, USDA loans are a good way to buy a house.
Making Their Case for Getting a USDA Loan
Felons must take their situation seriously and be persistent. No, it won’t be easy to find a house. Doing the things that it will take to reach that goal and buy a house will be challenging, but what hasn’t been since leaving prison?
It is essential for felons not to lie on a mortgage application. This includes giving false information, omitting past jobs, and fabricating previous employers as well as being dishonest about their criminal record. Lying about a felony constitutes mortgage fraud, punishable by possible prison time.
Felons need to be willing to do what it takes. They might have to live in an apartment or other short-term housing in the beginning. They can work on building their credit score. They can demonstrate their desire to live an honest life by going through a re-entry program or getting further education and training to get the knowledge and skills they need to find a job. Having their record expunged sends a strong signal that they are serious about re-establishing themselves and living an honest life.
Felons that want to buy a house need to concentrate on establishing a positive work history and re-building their credit score. They must be patient as it will take time to succeed at this. They shouldn’t give up but continue in their efforts to buy a house just as they did their sentence, one day at a time.
Felons trying to buy a house should rely on their family and friends for support. There are many houses for sale. There is no reason why a felon can’t be a homeowner, and the USDA offers a reasonable alternative for financing a mortgage.
What do you think about this blog post? Are you or someone you know been in the situation of trying to qualify for USDA loan with a felony? What was that like for them, and how did they achieve success? Please tell us in the comments below.