In today's financial climate first time homebuyer's are really stuck having to come up with a down payment to purchase a home or get a sizable gift from a relative that is loosing money in their own portfolio.
I have had many requests for more information from the Kansas City Area Realtors that need this type of program to get starving potential homeowners into a mortgage. This will help boost sales and provide a home loan that will benefit a person over the long term. No adjustable rate, No PMI.
This post is for consumers/homebuyers, Real Estate Professionals and Mortgage Professionals that may not have a good working knowledge of the features and benefits of the US Department of Agriculture's Guaranteed Rural Housing program. In the last 14 years I have one of a very few lenders closing these Guaranteed USDA home loans in Johnson County, Kansas. I have always known that it is one of the most under-utilized mortgage loan programs in the United States.
For purposes of this Posting Most the information below pertains to the Kansas City Market, and most importantly to the Gardner, KS area. There are links to help you find more information directly from the USDA.
Many Advantages of this home loan are:
•1. No down payment required.
•2. No Mortgage Insurance.
•3. No cash reserves required.
•4. No seller contribution limit.
•5. No Prepayment Penalty
•6. Loan up to 102%* of appraised value allowed...not the lesser of Sale Price or Appraisal
•7. Loan amount can include closing costs and prepaids up to appraised value.
•8. No stated maximum loan amount; maximum loan based on repayment ability
•9. No First Time Homebuyer Requirement
•10. New and existing homes OK
•11. Fully amortized 30-year fixed rate loan
•12. No minimum credit score required...common sense underwriting allowed.
•13. No minimum cash contribution required from borrower.
•14. No limit on CLTV when soft second financing.
•15. No limitation on source of funds for closing costs. No seasoning requirement.
•16. 100% gifted closing cost or down payment assistance is permitted.
•17. Non-traditional credit may substitute for lack of traditional credit history.
•18. No derogatory credit explanations required when credit score is 660 or above.
•19. Rent is not verified with FICO of 660 or more.
•20. Qualifying ratios of 29%/41%...29% PITI to Income and 41% Total Debt to Income, however standard ratios may be exceeded with documented compensating factors.
•21. Conventional type loan packaging with only 1 extra form required.
•22. Competitive rates (set by underwriting lenders) As of 1/19/2008 rates for loans above 85,000 are 5.25%
*Appraisal may be exceeded by amount of Guarantee Fee
Determining if property is in a Rural Development designated rural area:
Determining if applicant(s) have an acceptable credit history:
•1. Credit history must indicate a reasonable willingness to meet obligations when due.
•2. Streamlined credit approval when primary applicant has a middle credit score at 660 or above.
•3. No minimum credit scores.
•4. Lack of credit is not derogatory. Alternative credit verifications are allowed, typically 3 lines.
•5. Lenders make the credit decision.
Project the cumulative gross income of all adults in the household.
THE GROSS INCOME LIMITS CAN BE MUCH HIGHER THAN THE ADJUSTED INCOME LIMITS SHOWN IN THIS TABLE
If the projected dependable income exceeds the limits, certain adjustments can be made, such as childcare expenses for children age 12 or younger and paid to someone outside the family. You also can deduct one $480 annual deduction for anyone under 18 or a student who is not one of the applicants. Other deductions may be available (see FL/VI Handbook or RD Instruction 1980-D, www.rurdev.usda.gov/regs
Example: Johnson County 4-person family (2 adults, 2 children) has a gross income of $89610. Child care for the two children age 12 or less is $10,000 annually. Is the threshold income at or below the limit? YES. $89,610 less $10,000 child care less $480 for each child = $79,650.
All Counties within the Kansas City MSA
See the easy to use calculator at: http://eligibility.sc.egov.usda.gov/eligibility Click on "Single Family Housing" under "Income Eligibility"
Applicant(s) repayment ability:
Ratio limits are 29 front (housing, PITI), 41 back (total debt, MOTI). Rural Development generally allows expanded repayment ratios if recommended by the lender's underwriter. 31%/43% automatic for dwelling built after 1/1/2000.
Other eligibility criteria:
•1. Do not own a suitable dwelling.
•2. Insufficient resources to secure conventional 80% loan without the guarantee.
•3. U.S. citizen or permanent resident or qualified alien.
•4. Financed dwelling will be primary residence.
Loan-To-Value (LTV) and Loan Limit:
•1. 102% LTV for the guaranteed first mortgage loan when including the guarantee fee, 100% LTV without the fee included.
•2. Loan amount can exceed appraised value by the amount of the guarantee fee.
•3. There is no loan limit