Home > Blogs > Jeff Belonger > Mortgage Knowledge at its BEST!!!! (Jeff Belonger)

USDA Loans - The Rural Housing Loan - The Basics

By Jeff Belonger

Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

April 18, 2009 11:33 AM

USDA Loans - rural housing loans USDA loans in many areas are becoming more popular, yet many loan officers still don't know much about them, hence why they still aren't talked about much. Just as FHA loansweren't used as much as they should have from 2000 - 2006, because subprime and some conventional loans were easier for the loan officer to give to the consumer, even though it might not have been the best loan for them. I am sure in some cases, FHA loans are given before the USDA loan because of the lack of education on the loan officers part.... just my .02.

Some great benefits that USDA loans offer -

It's one of only two types of mortgages that offer real 100% financing, with no money down on the property. The other would be VA loans.

Just because it says rural development doesn't mean farm land or properties that are miles apart from each other. Ask your loan officer if your property that you are looking to purchase might fit into the property location guidelines.

There is no monthly mortgage insurance, even with zero down payment. The only other mortgage like this, again, VA loans.

There is no seller contribution limit, just as in FHA loans, to where the seller can contribute up to 6%. It's look upon as reasonable closing costs. And keep in mind, each state has their own limits to what a lender can make anyhow, usually falling under section 32.

100% of the closing costs can be gifted.

The loan amount can include closing costs and repairs up to the appraised value. (call me or e-mail me for more of an explanation)

Credit scores of 580 and below are highly scrutinized by USDA. There are many things that need to be looked upon. Scores from 620 and above meet the normal credit standards and get an automatic credit waiver on such things as explaining derogatory credit and rental verifications.

Normal qualifying income ratios are 29%/41%. You can exceed these ratios if you have scores above 660 and you don't have to apply for a debt-to-income waiver. Those below 660, you have to have compensating factors and apply for an income ratio waiver.

There are income restrictions, yet as of April 20th, 2009, there will be new income limits for the better. Basically the 4 person income limits will now be for 1 person income limits.

One important thing to remember, you can't have an in-ground swimming pool if you are using USDA that came from the 2009 stimulus bill. If it's the normal USDA monies allocated yearly, then it's okay, but you need to check on this with your lender.

IMPORTANT - These are USDA's guidelines, yet lenders can after overlays, to where they might be more critical on credit scores or debt-to-income ratios. Please keep this in mind.

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages -

- Conventional Loans - 203 k loans -

- Mortgages -

Experience & Knowledge at its BEST !!!

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Re-Blog

Featured

Comments(69)

Comment

Show All Comments Sort:

Darin Osenberg

Funky Quail Vintage - Nashville, TN

Karen- U r merely speaking about the USDA proper! One thing to note to all commentors and readers...There are LENDERS/FUNDERS that will continue to FUND USDA loans, EVEN IF the USDA is out of money!!!! Hence, when people post information like that, it is driven only toward the USDA!

It IS possible that the lender you either work with, or for...doesnt have that ability to work with that particular funder! For example, here in Wisconsin....we get referrals from the local banks when the USDA is out of money, because they cannot take it anywhere else! In my case, I was able to close loans through the CHASE rural development programs, despite the USDA being out of money!

It is nice that you posted these comments for Mr. Belonger's blog, but you might want to email him before you post links!

Barbara- GREAT QUESTION!!!! YOU are corect! Huge difference! The RD direct is a completely different program, super low rate, but is driven toward low to mod income families! Jeff I am sure will respond to this even more!

Best to all! And, make sure you hang with guys like Jeff to give you CORRECT INFORMATION! He will either know the answer to the question, or get you the right answer!!!

Darin
One Source Mortgage, LLC

Apr 20, 2009 05:02 AM

Gerry Suarez Jr.

New American Funding NMLS 6606 - Orlando, FL

FL Mortgage Guru

To Paul,

That's the perfect example of "knowing enough to be dangerous" and why there is no substitute for experience. As of October of last year this is what the USDA had to say about geographic eligibility:

"Has the word "Rural" in our Agency name caused an incorrectly assumed picture in your mind (of what areas are eligible for RD financing)? Our maps have not been revised in nearly 10 years. Therefore much of the vast Florida urban development that occurred since then is likely in the "eligible" area. The maps will not be revised until probably 2012. "

Bear in mind changes to these maps are made nationally so don't think this info applies only to Florida. This tells us if you assume, even based on USDA's own criteria, that an area is not eligible you haven't done your customer justice. The address lookup feature and the maps themselves are easy to use. Leave no doubt and utilize these resources instead of assuming.

The income and geographic eligibility can be determined here:

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

And to find your local offices you can use this link:

http://www.rurdev.usda.gov/recd_map.html

Paul, do know lender overlays cannot make an area acceptable to the USDA. Also regarding the income issue, I urge you to look back at the FHA loans you have closed in the last year and compare income to the new higher income thresholds. If you see what I saw, you will find most if not all of them would now fit the USDA income guidelines.

Paul the biggest danger to your comments is that you speak them with such conviction and authority, and people who don't know better would assume you are correct. I hope this shows you how important it is to be absolutely certain of your facts before reporting them. I stand ready to help you vet any information if you want.

Gerry Suarez, Jr.

Your FHA Loan Pro!

Apr 20, 2009 05:23 AM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

WENDY.... . here is a link .. USDA loans - USDA state offices - Eligible areas - thanks

DARIN....thanks for the compliment and I would agree, you just can't assume or even rely on certain web sites. EVen HUD doesn't always have the right answers for FHA loans when calling them.

ELENA.... yes, you can get a full gift, 100%, that can also be used for the down payment of the 3.5%.

ANONYMOUS commenter.... why do USDA loans suck? Would you say FHA loans suck also? In any case, you apparently know nothing about USDA loans then. It's great when you don't put any money down and don't have any monthly mortgage insurance.

DANELL.... . people need to be aware that lender overlays can be dangerous if not known. You just can't assume that what the USDA puts out there can happen, not until you double check with your investor or that lender that is buying the loan. thanks

PAUL... then USDA hasn't updated their site then. Besides, can you send me the exact link to where you read this, because I can't seem to find that. thanks

CHERYL.... from my understanding, you can't do a waiver on the pool if that USDA money came from the stimulus bill. Who said they are looking into the waiver? thanks for the compliment and yes, you can reblog this. thanks

KAREN... thanks for the links...

BARBARA.... . I will fill this part in later. There are only a few differences that I know of...

Apr 20, 2009 05:24 AM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

GERRY.... we commented about the same time... So I appreciate your follow up on the property location issue amd for the links. thanks

Apr 20, 2009 05:30 AM

Jeff Daniel

John L. Scott Ocean Shores - Ocean Shores, WA

Managing Broker, John L. Scott 360.581.9020

Thanks for these details. I'm showing houses today to a gal who plans on using this program. Good stuff.

Apr 20, 2009 05:48 AM

Paul McFadden

Responsive Pest Control - Seattle, WA

Pest Control, Seattle, WA.

www.usda.org. That's their website, Jeff. Within that, you should be able to reference current guidelines. Either that, or google USDA home loan guidelines and it will pop up. If you find something contrary to what I found, let me know. Otherwise, you may want to clarify your post. Thanks!

Apr 20, 2009 07:50 AM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

PATTY... yea, it can be a hassel looking up each address, but better to be 100% certain than assume by looking at the map.

PAUL.... . semi confused... even if it says it on their web site, why would I want to clarify this on my post. I gave you an example of a town here locally that you can do parts of the town with the USDA loan and that town has over 45,000 people in it. And Gerry gave a few examples that he says he has done many loans in areas in Florida with a much larger population. Besides, Gerry even mentioned that USDA hasn't updated some of their sites. As many of us have talked before, you can always believe what you read, no matter what the source. thanks

Apr 20, 2009 07:57 AM

Debbie Konter-Danville/Avon IN

FC Tucker - Avon, IN

Avon Indiana Agent

HI Jeff

We have been using these programs for about a year now and noticed they take about 45-60 days to process and the only other downfall is the seller can not cover the 2% fee. Thanks for posting this very informative.

Apr 20, 2009 08:07 AM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

DEBBIE...... the lenders that you are using then are either just too busy with not enough internal help or that they just don't know what they are doing. It only takes the USDA about 48 hours, maybe 72 hours to approve it themselves. Each office is different though. But from our side of things, it shouldn't take more than 3 weeks to fully process the loan, and in many cases, even sooner. Sooner if the loan officer did their job upfront and taking a complete application and got the majority of the documents. Have you found out any reasons to what the lenders are saying, why it takes 45 to 60 days?

In regards to the 2% funding fee. Why worry that the seller can't cover this fee? It can be financed into the loan. Just curious.. besides, I would rather use the seller help to pay for the other closing costs. thanks

Apr 20, 2009 08:15 AM

Paul McFadden

Responsive Pest Control - Seattle, WA

Pest Control, Seattle, WA.

Gerry and Jeff: I believe what I read based on what I pulled from the USDA website. If they haven't updated, I understand. Gerry: I believe you that you have done loans for cities larger than what is indicated. Again, I'm just telling you what I read. Since I'm from Washington state that is what I'm going to reference. This is where I do almost all of my loans as I stated in my comment above regarding income. I appreciate your knowledge on this but it's obvious that each state is slightly different on its guidelines. Believe you me I have to see if a loan is going to work so am well aware of the guidelines. Jeff: If you don't reference the USDA website in your post, maybe you should. That also is good customer information. Just a thought. Take care.

Apr 20, 2009 12:06 PM

Gerry Suarez Jr.

New American Funding NMLS 6606 - Orlando, FL

FL Mortgage Guru

Paul,

And so when you read that HUD accepts FHA loans to a 500 credit score are you going to say that people can get an FHA loan with a 500 credit score? We are responsible for providing our expertise to make all these guidelines and regulations make sense to general public. There is much grey area in our business Paul, but there is also much black or white. This issue of geographic eligibility is a black and white one. It does not vary from state to state so please don't further confuse people by making that claim. You should really speak to your local USDA office and they will be happy to confirm this.

Gerry Suarez, Jr.

Your FHA Loan Pro!

Apr 20, 2009 02:20 PM

Mike Henderson

Your complete source for buying HUD homes - Littleton, CO

HUD Home Hub - 303-949-5848

Great job on talking about the basics.

Apr 20, 2009 05:01 PM

Sukhdev Farmah

Triangle Lending Group - Morrisville, NC

jeff-great information thanks for post . i know my company offer USDA loans but i never look into it because i was thinking it is only for the rural area and farms even my co worker told me many times to check USDA guideline but i never did.But know i am thing this is great program and i also can consider this program for my clients.I will do the more search on this program .Thanks again for the knowledgeable information.

Apr 23, 2009 01:55 PM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

PAUL.... . what I don't understand is that Gerry and I actually gave you proof, what has been done, it populated areas greater than 20,000 people. It goes back to what you read on other sites. Just because it states something, doesn't mean that it's actually true. An updated site or not... and when we actually make this statement, but someone wants to argue it because they read differently, yet USDA loans have been done in other areas with more people, to me that is the proof. Not what a web site says. It doesn't matter where you are or are from... Gerry is in Florida and I am in New Jersey, so that is proof that it actually can happen in other states. And it had nothing to do with getting a special waiver or approval.

In regards to referencing the USDA site in my blog, I have done that in my comment... and so have others. And sometimes I don't list the sites for a reason, and here is a great reason. You are getting one piece of info off of a site that is not accurate. I want people to come to me with questions and not go to the sites. That is how I work. thanks

UNKNOWN comment ...... . how can I saw this politely.... first off, not showing your name tells me a few things. But your comment about skin in the game? A very weak argument, because I have known many that put 20% down and who still went into foreclosure. You apparently don't understand that the economy has something to do with all of this. Sure, there are some irresponsible people that would walk away from their home, with no skin in the game. But you are just throwing false comments out there just like the media did. Do you really think 3.5% in a property would keep those same people in the house? Before 1/1/09, it was only 3%. And what about VA loans? They are 100% and they have done very well.

Overall, it just seems like you are one to argue true home ownership. Most people value owning their own home and would do most anything to keep it, even if they put nothing into it. I had 2 people that put 20% into the property, saying that they were upside down, can't make payments, and would just walk away from the home. Yes, I disagree with your comment 110% and many other great professionals would say the same. but you will always have people disagree. Just that your comment sounds like a basic rant without thinking it through, from both sides.

GERRY.... . excellent point... and HUD doesn't even say that, they say no credit scores. Well, find me a lender that will go below 500, when HUD says that you can. Yes, it's call education, with the experience behind it, things that can be done and not assumed, just because one allows it. Yet you have to find who can.... to me, that's like misinformation. Yes, it is not state by state as he claimed... thanks for your input.

MIKE.... . thanks for the polite compliment.

SUKHDEV.... . my pleasure and I have always learned in this business especially, that you can't ever assume. Do your research before assuming or making statements. Just my opinion. thanks and good luck with it...

FRAN.... . that's good to hear about you bringing this program up to your borrowers. And even better that you have to reliable loan officers that can help with this program and that are knowledgeable.

MICHAEL.... .yes, than can be a great program. In regards to your statement that these take more time? That statement in my opinion is misleading though and you don't compare it to anything else. They don't take more time. If anything, 2 more days, because you need to send it to the USDA. Now, if you are a broker, yes, it could take another 30 days... but we are a mortgage banker. You should understand some of this, the difference. I went to your site and it seems like you are a lead generator, not a lender, hence why you should know more about this program. thanks

Apr 26, 2009 04:26 AM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Just for those following the comments, Michael did leave a comment, yet I asked him to delete his link that led to his web site, which was a lead generator site. He didn't understand why I asked him to take the link out. And then he decided to delete his comment. Here is his comment, minus the the link.

usda comment

I left this comment up here for a reason. There are some false rumors that these loans take much longer. Yes, if you are a broker, because you are relying on another company, who are all backed up. Many are saying that they are taking 45 to 60 days to do a USDA loan. They are still taking us 3 to 4 weeks, because we controls 98% of the process and underwriting them in-house. thanks

Apr 26, 2009 04:32 AM

Lorinda Ward

Keffer Realty - Norfolk, VA

Serving, Hampton Roads Virginia. Norfolk, Chesapeake, Va Beach

Anytime, I want answers about a loan program, I know I can count on you! My clients have been coming to me with USDA approvals and I feel a lot of buyers in my area will do better with this type of loan. I have found that their website is not user friendly (at least for me).

Thank you again and have a great successful day!

May 16, 2009 10:52 PM

Karen Deis

ApartmentToolKit.com - Minneapolis, MN

When In-house training is not enough!

They increased the dollar amount to fund MORE USDA loans--but they never added more staff to handle the increased loan originations. As always, the government never thinks things "all the way thru"! You'd think they'd learn...

Jan 03, 2010 11:44 PM

David Jirasek

Jirasek Realty, LLC - Temple, TX

ALC, CCIM

All in all, this seems to be a great program for buyers, expecially with no down payment. However, USDA either laid off employees, or they all took off for vacation during the end of December, as USDA was running weeks behind, thus making us a month overdue on closing, and the buyer having to figure out where to continue living until they could move in, but making not only the listing agent, and buyers agent wait for their "payday", the surveyor, home inspector, and appraiser, where all waiting through Christmas with no money to take home either. It finally closed last week. The local lender is filing a complaint against USDA I hear. It's another great government program!

Jan 21, 2010 11:25 PM

Gita Bantwal

RE/MAX Centre Realtors - Warwick, PA

REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thank you for the great post. I know they are supposed to vote on it this weekend. I wonder if they will be able to close the loans by 30th June.

May 27, 2010 12:32 AM

Barbara S. Duncan

RE/MAX Advantage - Searcy, AR

GRI, e-PRO, Executive Broker, Searcy AR

Heather, you had a USDA RD Direct loan which is vastly different from the USDA RD guaranteed loan as discussed in this blog. Your payment was subsidized which is a blessing to so many people. You only repay the subsidy IF you sell the house and make a profit from the sale. Then the government expects you to repay part of the subsidy but not all of it. I'd gladly part with a portion of my profit if I made a profit.

Houses with this type financing typically have to have great insulation for low utility bills. Sounds as if you lived there for quite a while so actually the house may have been a blessing even if you did end up losing it. I've sold a lot of them and the people are happy in them.

Nov 16, 2010 01:07 AM