USDA Rural Development Funding Update
On Friday, July 29, 2010, the President signed H.R. 4899 into law which provides funding for the USDA Rural Development program. This legislation includes several changes, including the ability for the program to be self funding going forward. While this welcomed news will replenish funding, the USDA product cannot be re-activated at this time because the funding approved by H.R. 4899 has not been distributed to the USDA offices.
In addition, the USDA’s final decision to waive the guarantee fee for low income borrowers and delay the implementation of the re-occurring .5% fee until 2013 is still pending. Once these items have been confirmed and funding is allocated to the state offices the program will be re-activated.
Important Bill Highlights:
• Increase to the current guarantee fees
o Purchases from 2% to 3.5%
o Refinances .5% to 2.25%
• A re-occurring .5% fee (similar to MIP) for purchases and refinances
o Anticipate the Secretary of Agriculture will delay the implementation of this fee until 2013
• The guarantee fee may be waived for borrowers deemed to be "low income" as determined by the USDA income limits
• The changes incorporated in this bill will enable the program to be self funding (yearly funding allocations will no longer be required)
Update 09/29.2009
The USDA 2009 fiscal year ends on 9/30/09. While USDA will continue to issue Conditional Commitments until they receive their 2010 fiscal year funding, during this time period the commitments will be "subject to the availability of funds".
We do not close these loans will out a commitment to fund. So since we do not know when USDA will get their new funding we have made the business decision to NOT lock any of these loans until further notice. Also we can not CLOSE these loans until USDA has their new funding.
The reason for this business decision is that if for some reason we did not receive the funds or the loan was not purchased by USDA we as a company would be responsible to holding this loan on our books. That is just not a business risk we are willing to take.
Loan Modifications and Government loan Qualifications
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This link will take you to the website for any of you that have any
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have a zero down loan program to help our economy rebuild by helping
buyers get loans that are affordable. Click on the link below:
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Loan Guarantee Program (Section 502)
Under the Guaranteed Loan program, the Housing and
Community Facilities Programs guarantees loans made by
private sector lenders. (A loan guarantee through HCFP means
that, should the individual borrower default on the loan, HCFP
will pay the private financier for the loan.) The individual works
with the private lender and makes his or her payments to that
lender.
Under the terms of the program, an individual or family may
borrow up to 100% of the appraised value of the home, which
eliminates the need for a down payment. Since a common
barrier to owning a home for many low-income people is the
lack of funds to make a down payment, the availability of the
loan guarantees from HCFP makes the reality of owning a
home available to a much larger percentage of Americans.
A Place to Live
Buying on Repairing a Home With Help From USDA's Single
Family Housing Direct Loan Program
A Place to Live
Owning your own home is part of the American dream. But in
rural areas, financing a home can be difficult. Jobs often pay
less than in more populated areas, and a large proportion of
people are self-employed, making it harder for them to obtain
credit. Also, rural lenders generally require a large
downpayment, and, often, interest rates and construction
costs are higher than in urban areas.
However, if you want to own a home in a rural area, U.S.
Department of Agriculture (USDA) Rural Development may be
able to help.
USDA has been helping rural Americans become homeowners
since 1949. It has invested well over $54 billion in helping
people purchase or build their own homes. USDA Rural
Development's Direct Homeownership Loan program offers
home loans to lower income individuals who are unable to
obtain credit elsewhere,with interest rates as low as 1 percent
-- and no downpayment.
Buying a House With Help from USDA
Section 502 Direct Loan Program
The Direct Homeownership Loan program is available to lower
income individuals and families who wish to live in rural areas
or rural cities or towns. Under the program, individuals or
families receive a loan directly from Rural Development.
Payments are based on income, with no downpayment
required. You must be unable to obtain a homeownership loan
from a bank or other conventional sources.
Loans under the Direct Homeownership Loan program are
made to families with incomes below 80 percent of the median
income level of the communities in which they intend to live.
Almost half of these loans are made to families and individuals
with very low incomes. Since Rural Development is able to
make loans to those who will not qualify for a conventional
loan, the direct loan program enables many people to buy
homes who otherwise could not do so. Even if you have minor
credit problems, Rural Development may still be able to work
with you.
Loans under this program may be made for the purchase of an
existing home or to build a new home.
Other uses include purchasing and preparing sites -- including
providing water and sewage facilities -- and repairing or
renovating a house being purchased.
No Downpayment
There is no required downpayment for a USDA direct housing
loan. The standard term for a loan is 33 years for most
borrowers. However, 38-year loans are available to those who
cannot afford a 33-year loan.
The interest rate for direct housing loans is set by Rural
Development, and is based on your current income. Your local
USDA Rural Development office can estimate the interest rate
you would pay.
For further information on the Single Family Housing Direct
Loan program, and to learn if you are eligible for assistance,
contact the USDA Rural Development local office serving your
area. Rural Development employees will help you complete an
application.
Guaranteed Loans
If your income is too high to qualify for a direct housing loan,
you may qualify for a guaranteed loan. These are loans made
by other lenders, such as banks or credit unions, and are
guaranteed by Rural Development. This allows other lenders
to make loans to people they would not otherwise be able to
serve. Guaranteed housing loans are available to applicants
whose incomes are below 115 percent of the median area
income. Your Rural Development local office can give you more
details about this program.
The Mutual Self-Help Housing Program
Many rural families have achieved the American dream of
owning their own homes through USDA's Mutual Self-Help
Housing program.
Under this program, families provide a substantial portion of
the labor involved in building their own homes. This "sweat
equity" contribution reduces the total cost of purchasing a
home -- allowing many people to purchase houses that
otherwise would have been out of reach. Also,because it
brings different families together to work on each other´s
houses, the program builds and strengthens the ties of
community.
Self-Help works in combination with a grant program to
nonprofit organizations and the direct single family lending
program, although other home financing sources can be used.
The nonprofits help families become successful homeowners
by providing technical assistance. This includes
homeownership education, loan packaging, and construction
supervision.
The Mutual Self-Help Housing program has been in operation
since 1971. It is active throughout the country and helps some
1,500 rural families build their own homes each year. Your
USDA Rural Development local office can tell you if a Self-Help
Housing effort is operating in the area in which you wish to live.
Home Improvement and Repair Assistance
If you´re already a rural homeowner and your house needs
repairs, or modifications to make it accessible to a person with
a disability, you may be eligible for home improvement or
repair assistance through USDA Rural Development.
Single-Family Housing Home Improvement
Loans (Section 502)
In addition to providing loan funds for the purchase of a
house, the Section 502 Single Family Housing Direct Loan
program can help lower income rural homeowners make vital
improvements to their homes. Section 502 loans are available
to make substantial home repairs when other loan options are
not available.
Home Repair Loan and Grant Programs
(Section 504)
For families and individuals with very low incomes, Rural
Development makes loans for repairs, to improve or modernize
a home, make it safer or more sanitary, or to remove health
hazards. For seniors 62 and older who cannot afford a loan,
grant funds are available for these repairs.
The most common types of repairs financed by the Section 504
program include fixing or replacing roofs, modernizing heating
and wiring systems, and making houses accessible to people
with disabilities.
You can also apply for funds to install insulation and storm
windows, put in a septic system, and install or repair a
bathroom.
The maximum amount you can borrow under the Section 504
Home Repair Loan program is $20,000. The interest rate for
these loans is 1 percent and is limited to very-low-income,
rural residents whose incomes fall below 50 percent of the
area's median income.
For very-low-income homeowners 62 years old and older who
can't afford to borrow the full amount required to make
necessary repairs, grant funds are available. Grants may be
used to remove health or safety hazards or to remodel
dwellings or make them accessible to household members with
disabilities. Grants are limited to $7,500. They are often
combined with loans to increase the amount available for
repairs.
Housing Preservation Grant Program
Under this program, nonprofit organizations, public bodies,
and Native American tribes renovate deteriorating homes and
rental properties using grants from Rural Development. Grant
funds are used to repair and bring up to code properties
occupied by families with low incomes. Your USDA Rural
Development local office can tell you if a Housing Preservation
initiative is operating in your area.
The USDA is here to help you.
If you want to buy an affordable house in a rural area, USDA
Rural Development employees want to help. They can tell you
about the various programs available through Rural
Development and assist you in applying for them.
Further information on all of USDA's housing programs is
available at the USDA Rural Development office serving your
area. These are usually listed in telephone books under
"United States Government, Department of Agriculture."
Information is also available on the USDA Rural Development
website at http://www.rurdev.usda.gov/Housing
Programs/index.html, or contact the Housing Programs at the
following address:
FHA Mortgage Loans
In 1965 the Department of Housing and Urban Development (HUD) was formed. Within HUD operates the Federal Housing Administration (FHA), which has the primary responsibility for administering the government home loan insurance program. This program allows a first time home buyer
The most popular FHA home loan program for a first time home buyer is by far is the 203(b). This is your standard fixed rate loan for 1-4 family owner occupied houses and only requires a minimum of 3% from the borrower. This loan also permits 100% of their money needed to close to be a gift from a relative, non-profit organization, or government agency.
The main advantage to a FHA home loan is that the credit criteria for a first time borrower are not as strict as Conventional Loans sold to Fannie Mae (FNMA) or Freddie Mac (FHLMC). Someone who may have had a few credit problems or no traditional credit should not have a problem obtaining FHA financing. Also, FHA home loans are assumable, allowing a person to take over the mortgage without the additional cost of obtaining a new loan. In addition, the seller or lender must pay for part of the "traditional" closing costs (called non-allowable costs) while a borrower's allowable costs can partially be wrapped into the loan. The monthly mortgage insurance premium is cheaper for an FHA loan verses a conventional loan with 3% down. Finally, FHA loans may may require less income to qualify as they will exceed the Conventional debt ratios of 28/36% as their standard is 29/41%. To learn more about debt ratios, please see the income section.
Many people make the mistake and assume that FHA loans are only available for first time home buyers. This is not true. FHA loans are available to anyone, whether your first or fifth home and can be used to purchase a home or refinance a home. If refinancing a home the current loan DOES NOT have to be an FHA loan.
The greatest disadvantage of FHA home loans is that FHA limits the loan size that a borrower can borrower Please see the link for FHA Loan Limits in your area. Others may try and convince you that the FHA upfront mortgage insurance premium