How To Complete A USDA Self-Assessment | TMH 024
In this post I am going to give some information on how to use the USDA Single Family Housing Direct Loan Self-Assessment tool.
I didn’t think I needed to write this post until I did an assessment through the USDA and it came back $30,000 lower than my self assessment. When I asked the assessor the numbers she was using, she said she entered the property tax at $6,000 - the amount she had previously given me to enter was $5,000. At this point I started looking into how property tax, and how much homeowners insurance is.
So, here are the steps for self assessment - time to get to work!
Determining property tax.
Look at the property tax rate for the county in which you live, or are looking to live. I used Smartasset.com for this. Los Angeles County is 0.720%.
Look at the Area Loan Limits in this PDF from the USDA. The limit for Los Angeles County is $657,900.
Add any down payment you may have to the loan limit. Down payments are not required for USDA Direct Loans unless you have non-retirement savings above a certain amount - more about that in a future post. Let's say for this example there will be no down payment.
Property tax: $657,900 x 0.0072 = $4,736.88 a year.
You may notice this is a little below the initial $5,000 I was given for the Self-Assessment, and far below the $6,000 that was used for the USDA Assessment.
Remember: this property tax number is not accurate because it doesn’t take into consideration debts and homeowners insurance.
The next estimate you need is homeowners insurance. I used Nerdwallet.com for the amount. It gives California at an average $1,224 a year, and Los Angeles at an average $1,335 a year - I’ll go with the specific and higher Los Angeles to be on the safe side.
Next will be your debts. This will include items such as car payments, minimum credit card payments, alimony or child support, other loan payments, and anything shown on your credit report. This will not include items such as phone bill and rent - this is because you could switch phone carriers to pay less, and when you move you will be paying your mortgage and not your rent.
For student loan they are calculated at you actual monthly payments (such as Income Based Repayment plans) if you can meet the following requirements per USDA Field Office Handbook HB-1-3550 > Chapter 4:
The loan is in repayment status.
The applicant has a credit score of 640 or Higher.
The applicant has no significant delinquency as outlined in Paragraph 4.14 B (See Handbook above)
The applicant’s payment shock can be measured and is not more than 100%. If you are wondering what Payment Shock is - as I was - Here is some info on that.
If the 4 requirements above can’t be met student loans monthly payments will be calculated 0.5% of the total. For example, a Student Loan of $100,000 X 0.005 = $500 monthly payment.
Now it is time to use the Self-Assessment and enter the information established above. Once that is done you will have a total loan amount. Is the loan amount close to the maximum loan amount for your area? If it is, you can probably sit with that. If not, take the new loan amount and multiply it by the county property tax rate and start over. Work until the loan amount and the property tax begin to agree, and then you will have a good idea of the loan amount you can get. It took me about six tries. Also, you can hit the little question mark “?” next to items for more information.
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