The USDA has announced that system enhancements which allow them to use their new funding have been completed. Although these funds had been granted by Congress, the USDA was unable to use them pending changes in their system that allowed for the increased Guarantee Fee of 3.5%.
What this means is that USDA loans are expected to be fully funded through at least 2011! Look for all of the lenders that had been out of the market to begin providing USDA loans again very soon- some lenders have already sent out notices this morning.
The even better news is that GUS, the Guaranteed Underwriting System, will be back on line. By making automated underwriting recommendations GUS has allowed many lenders that that would not manually underwrite loans the ability to offer USDA loans. GUS also allows greater flexibility in the ratios of debt versus income than manual underwriting allows. This means borrowers with excellent credit and other strong positives factors will be allowed greater flexibility in underwriting.
So if you have been waiting for good 100% financing option your wait is over! Unfortunately local USDA offices will be working on the backlog of files that have been done "pending funding availability" over the last few months. This means delays in underwriting for the short term so make sure you take that into account when planning a closing date. Here in Central FL look for delays upwards of two weeks just for the USDA underwriting portion until the backlog is resolved.
Also do remember that the USDA Guaranteed Rural Development Loan program is subject to geographic and income limitations. For more information of those access the USDA eligibility page here.
Coupled with the 100% financing, the lack of monthly mortgage insurance and the flexibility in allowing seller paid closing costs make USDA loans a no brainer for borrowers that meet their guidelines. With rates in the low to mid 4% range it's easy to see why these loans are such a great deal!