Most of my posts are on the USDA Guaranteed Rural Housing Mortgage program. This is a mortgage program that gives 100% financing, including, if necessary, the funding fee, closing costs, and prepaids to enable a buyer to get in a house with absolutely no money down. This program is one in which the client goes to a mortgage lender (such as Northstar Mortgage Group!), a bank or a mortgage broker to get their financing. If a client makes less than a specified amount for a specific purchase area, and the property fits the geographical requirements, we can assist a buyer with financing.
However, what happens to those people who don't make enough money to qualify for a home traditionally, whose income levels probably won't qualify them for any house in the area based on traditional guidelines? Those that are between 50 and 80% of the area median income (AMI) are considered low income, or those that make less than 50% of the AMI are considered very low income. Most of the time, these buyers can't qualify for a USDA Rural Housing Guranteed Mortgage. What happens to them?
Most lenders, bankers and brokers won't tell you or your client this because they won't get paid on it, but USDA has another program to help these people obtain homeownership. It's the USDA Rural Housing Direct Loan program. These are directly funded by the Government and are available for low and very low income households. These loans are commonly referred to as Section 502 Direct Loans.
Recently, I have had two calls from prospective buyers who wanted to purchase a home; both of them fit the low to very low income guidelines of the USDA Direct program and I referred them to the USDA to apply for that program. One of them purchased a house and his total payment, including taxes and insurance, is $475. The other has a payment of $437!
USDA Direct loans are for terms up to 33 years (38 years for those with incomes below 60 percent of AMI and who can't afford 33-year terms). The interest rate is based on the Government's cost of money and is modified by payment assistance subsidies. Applicants must have reasonable credit histories and the housing must be modest in size, design and cost.
If you or someone you know is without adequate housing but would be able to pay monthly mortgage payments, contact either your local USDA office (there is typically one in each county) or you can contact me and I can point you in the right direction.
It's not always about the income we get from originating mortgages; sometimes it's about helping our fellow humans get the most basic of needs!