I have had the wonderful experience of working directly with an underwriter through the USDA Rural Development loan program recently. In the process I have educated myself to a program that I believe is under used and fully funded.
USDA RURAL DEVELOPMENT LOANS WORK!!
If you have a client that is in a lower income bracket, has some credit challenges, disabilities or no money for down payment - this program more than likely can help your client become a homeowner. When the conventional banks turn these Buyers down, USDA Rural Development will look at the bigger picture and work with them.
The only catch for some is that they fund homes in more rural areas, just outside the city. Not out in the backwoods necessarily but in the smaller communities to help promote growth. Their website does allow for you to see if a city of interest is approved by their program.
There are two ways to apply for USDA Rural Development loans.
Guaranteed loans are issued with a participating bank that funds using the USDA Rural Development funds. They have a relatively short approval time frame and can get your client pre-approved for a lower interest rate than they may qualify for otherwise.
Applying directly to the USDA Rural Development nets your clients are far better deal in terms of subsidys, lower interest and higher loan amounts. The problem with this is the backlog can take the approval process from 6 months to a year.
How do we resolve it? Of course we want to get our clients the highest loan amount, with the lowest interest and best payment given their circumstances. One suggestion I received was have your clients get the guaranteed loan through their local bank if they are currently home Buyers. After a few payments, they can apply to the USDA Rural Development directly for a refinance of that loan. This may still take them 6 months but the possibility of them getting better rates for their new loan have a high probability.
This program may help that Buyer that everyone else rejects or that will only loan them a very small amount with a high down payment. USDA is 100% financing. Definitely another option for your Buyer to consider.
Contact your lender and see if they handle USDA loans, if not make sure you have a lender in your pocket that does!
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