USDA: Running Out Of Funds? UPDATE as of 06/01/10 - USDA NOW HAS FUNDS

Mortgage and Lending with Amerifirst Financial, Inc

USDA Running Out of Funds   As of 06/10/2010 - USDA now has funds available.  For more info go to : USDA Has Funds

It is well known that USDA is running out of money in May 2010.  However, one should consider the consequences to the depletion.  USDA has informed us that they are now leaning on $24 million dollars. When considering how much the program has gained in popularity, this amount will not go very far, if at all last until May. 

There is some cause for concern, however knowledge is king and it is not the problem rather the solution we must focus on. 

FHA is raising the Upfront Mortgage Insurance Premium from 1.75% to 2.25%.  Although this doesn't necessarily affect the qualifcation, it is indicative that the industry is gauging their previous losses with a magnifying glass.  On another change, FHA has announced that come early summer, the maximum seller contribution will become 3% compared to the current 6%. This means buyers will need to not only bring in their 3.5% required down payment but also another 1-3% depending on the loan amount and the hard costs associated with it.  This may very well lock out buyers who cannot come up with 5-6%, especially in these hard times. 

Another thing to consider are the homes under contract that are depending on USDA financing. What happens to those sellers and buyers if they fail to secure the necessary USDA financing?  How many of those borrowers have sufficient funds to initiate a Plan B (Placing 3.5% as a down payment)? 

This information is not to be alarmist rather inform both professional and consumer that they will need to weigh their options and form a Plan B in the event these changes and future changes affect the outcome of finalizing the purchase of a home. 

One tip is to seek a lender that is known for closing quickly and try to lock in either an FHA Case Number before April 5th or underwrite the USDA loan quickly and solidify what is known as USDA's Final Commitment.  A company that can offer a Ten Day Close and that has their own underwriting and funding under one roof. 

Ted Canto

Sr. Mortgage Consultant

Academy Mortgage - Mesa, AZ




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Elite Home Sales Team
Elite Home Sales Team OC - Corona del Mar, CA
A Tenacious and Skilled Real Estate Team

Very interesting and scary we are getting to that point where we will soon be able to predict the markets future.  Around May of this year.

Mar 31, 2010 05:23 PM #1
Randy Ostrander
Lake and Lodge Realty LLC - Big Rapids, MI
Real Estate Broker, Serving Big Rapids and West Central MI

Another problem will be buyers who thought they had RD funding could lose the Tax credit because now they won't be able to close before the deadline. How does something that affects so many happen every year. Someone in our Government is not paying attention.

Mar 31, 2010 05:25 PM #2
Ted Canto
Amerifirst Financial, Inc - Phoenix, AZ
Arizonan #1 Mortgage Lender

Mark, I agree! Come May, we will get a good look at what is to come.  Hopefully some of the other initiative like HEFI and HAFA will provide some relief. 

Randy, the good thing that even if the loan does not close before the end of April but are in contract before then, they can still get the tax incentive as long as the deal closes before end of June. 

This is why I posted this so that people can start forming PLAN B!!

Mar 31, 2010 05:31 PM #3
Carra & Shae Riley
Brokers Guild Cherry Creek Ltd - Westminster, CO
Helping people Transition at all ages!

Ted...Such a sad thing for potential buyers.   Coming up with downpayment and closing costs can be a real challenge for buyers in this economy.  Plan B for buyers has never been more important.

cosmic cow

Apr 03, 2010 06:58 AM #4
Ken Speer
Alpha Global Associates - Phoenix, AZ

Ted ~ I have to agree with Carra, a good plan B is truly important now.  Thanks for the very useful information.

Apr 11, 2010 03:41 PM #5
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Arizonan #1 Mortgage Lender
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