OK, by now you know that I am about solutions not problems. With that in mind, how can we about part of the solution?
Remember that when one window closes (subprime), another opens (FHA, VA, RD). The Feds insure a great, little know mortgage program called USDA Rural Development. It is what is imply's. A mortgage that provides funds for folks (just like many of us Hoosiers) to purchase and get a mortgage on a home and land. this is a 100% mortgage product with conforming fixed and adjustable rates (some rate bumps will apply). With this mortgage you have no maximum loan amount and no reserves are required. About the only downside I can find will be the income caps that are in place along with standard debt ratios.
Posted below is the quick guide from USDA. I do have end investors that are looking for this business and can help you and I Help Hoosier Households. While I have not closed this type of mortgage I do have one in process and let you know what I have encountered.
Lets make a difference and Help some Hoosier Households. Now all you mortgage brokers reading this I call "dibbs" on Indiana. You folks can have the other 49 states. (Kidding a bit. I think?). But with all seriousness, talking with investors this is a great program that not many of us take advantage of the benefits it can have for our clients so lets be part of the solution!
QUICK QUIDE
Rural DevelopmentHousing & Community Facilities Programs
Advantages:
No Down Payment Required
30 year fixed rate
102% LTV (100% plus guarantee fee)
Finance Closing Costs If Appraisal Is Higher Than Sales Contract
No Mortgage Insurance
No cash contribution required from borrower.
Unrestricted gifts, no need to document source.
No Maximum Loan Amount
No Reserve Requirement
High earnings potential.
Competitive rates (set by underwriting lenders).
Available secondary markets: wholesale lenders as well as Fannie Mae and Freddie Mac.
Delegated underwriting for D.E. FHA, Fannie, Freddie, and VA approved underwriters.
Utilize in Conjunction with State Housing Authorities, if available.
Rural Development designated rural area:
Homes must be located in rural areas. Rural areas include open country and places with a population of 10,000 or less and-under certain conditions-towns and cities with between 10,000 and 25,000 residents. There is an automated rural area eligibility calculator at http://eligibility.sc.egov.usda.gov, click on “property eligibility”. If you need additional assistance, please contact your local Rural Development office.
Acceptable credit history:
Have a credit history that indicates a reasonable willingness to meet obligations as they become due
Lender underwrites the loan
Streamlined credit approval when primary applicant has a middle credit score above 620
No minimum credit scores
Lack of credit is not derogatory
Caution for applicant(s) with multiple layers of risk such as:
payment shock; low credit scores; ratio waiver; credit waivers; 2-1 buy downs
Check maximum income for eligibility:
Applicant(s) have an adjusted household income that does not exceed the moderate income limit established for the area. A family’s income includes the total gross income of the applicant, co-applicant and any other adults in the household. Applicants may be eligible to make certain adjustments to gross income-such as annual child care expenses and $480 for each minor child-in order to qualify. USDA Rural Development field offices can provide information on the moderate income limits for the areas that fall within their jurisdictions, and can provide further guidance on calculating household income. There is an automated eligibility calculator at: http://eligibility.sc.egov.usda.gov
Applicant(s) repayment ability:
The ratio limits are 29 front (housing, PITI), 41 back (total debt, MOTI). Rural Development allows expanded repayment ratios if the applicants have sufficient compensating factors. The underwriter must recommend the expanded ratio(s) and provide compensating factors to Rural Development. Rural Development must concur with the underwriter’s recommendation in order to expand the ratios.
Other eligibility criteria:
Do not own a dwelling
Insufficient resources to secure conventional without the guarantee
U.S. citizen or permanent resident or qualified alien
Legal capacity
Primary residence
Loan-To-Value (LTV) and Loan Limit:
100% LTV plus the amount of the guarantee if financed
Loan amount can exceed appraised value by the amount of the guarantee fee
There is no loan limit
-Limiting factors will be ratios and income limit
Property requirements:
New or proposed home construction:
Meet the county and state code. Use conventional appraisal (new homes only).
All existing homes: Meet requirements of HUD Handbooks 4905.1 and 4150.2 and comply with Rural Development thermal criteria. Contact your local or state Rural Development office for alternatives to HUD Handbooks and the thermal criteria for a particular area. Loan funds may be used for repairs. Typically repairs must be completed prior to Rural Development issuance of the Loan Note Guarantee
Both new and existing: Private well water quality must meet local and state code.
FHA appraisers in the area can be found on the FHA web site: https://entp.hud.gov/idapp/html/apprlook.cfm
Existing (previously occupied) manufactured home: Cannot finance under this program.
New manufactured homes: Rural Development will finance new manufactured homes through approved dealer-contractors. Contact your local Rural Development office for a list of approved dealer-contractors and the specifics of how new manufactured homes can be financed.
Modular homes: New or existing modular homes can be financed the same as stick built homes.
Condo: Rural Development can finance if it meets the standards for Fannie Mae, Freddie Mac, VA, or FHA.
Town home: Same as condo. A town home must have provisions for maintenance such as HOA.
Flood Zone:
Any existing improvements located in a special flood hazard area must have federal flood insurance coverage. New construction is not permitted until a Letter of Map Revision/Amendment is issued by FEMA. Check with your Rural Development local or state office for exceptions to financing existing homes when the first floor elevation is below the 100-year base flood elevation (BFE).
One time guarantee fee of 2% of the final loan amount (it is only .5% on refinance of an existing Rural Development guaranteed or direct loan).
This fee can be financed along with other closing costs. The first mortgage guaranteed loan cannot exceed appraised value by more than the amount of the fee financed. No mortgage insurance requirement.
Term: 30 year fixed
Interest Rate:
Fannie Mae 90 day delivery plus 60 basis points or
The lenders published VA rate with no discount points
Prohibited Loan Purposes:
Co-signors not residing in the household
In-ground swimming pools
Existing manufactured homes
Construction draws
Furniture and personal property
Income producing property
Non-essential buildings and land
Additional resources:
www.rurdev.usda.gov is the Agency web site
Individual state web site is www.rurdev.usda.gov/ga (for example Georgia, add the state initial)
http://eligibility.sc.egov.usda.gov/ to determine eligible areas and if applicants are within eligibility guidelines
National directives are regulations are found at: www.rurdev.usda.gov/regs. Administrative Notices ending with (1980-D) and the regulation 1980-D.
THIS IS A QUICK GUIDE OF THE RURAL DEVELOPMENT GUARANTEED RURAL HOUSING PROGRAM. FOR ADDITONAL INFORMATION, CONTACT YOUR LOCAL RURAL DEVELOPMENT OFFICE.
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