USDA Presentation

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USDA Presentation

  1. 2. USDA RURAL DEVELOPMENT
  2. 3. WHAT IS RURAL DEVELOMENT? <ul><li>Census-based </li></ul><ul><li>US Department of Agriculture </li></ul><ul><li>Guaranteed against loss by USDA </li></ul><ul><li>Pays lender if borrower defaults </li></ul>
  3. 4. WHO CAN DO USDA LOANS? <ul><li>Approved lender with HUD, VA, Fannie Mae or Freddie Mac </li></ul><ul><li>State Housing Agency </li></ul><ul><li>Farm Credit Service </li></ul>
  4. 5. IT’S THE GOVERNMENT! <ul><li>Pays for itself – doesn’t use taxpayer money </li></ul><ul><li>Funded through the 2% Funding Fee </li></ul><ul><li>(which can be financed into the loan!) </li></ul>
  5. 6. LOAN PURPOSE <ul><li>Purchase new construction </li></ul><ul><li>Purchase existing home </li></ul><ul><li>Refinance (only if currently have a direct Rural-Development Loan) </li></ul><ul><li>Purchase Mobile Home (very limited; difficult) </li></ul>
  6. 7. REASONS TO NOT USE RURAL DEVELOPMENT FOR A BUYER <ul><li>Geographical Limitations </li></ul><ul><li>Maximum Income limitations </li></ul><ul><li>Can’t buy house with in-ground pool (can try for exception to this) </li></ul><ul><li>Primary Home Only </li></ul>
  7. 8. INCOME QUALIFICATIONS <ul><li>Household adjusted annual income cap uses ALL occupants whether on the loan or not, that are 18 and over </li></ul><ul><li>Counts gross income, overtime, commission, bonuses, net self-employment income, Social Security, Child Support, unemployment, etc. </li></ul><ul><li>Based on family size & county where property is located </li></ul><ul><li>http://eligibility.sc.egov.usda.gov </li></ul>
  8. 9. ADJUSTMENTS TO INCOME <ul><li>$480/Year per minor or full-time student </li></ul><ul><li>Verified child care expenses </li></ul><ul><li>$400/Year if borrower or co-borrower is over 62 or disabled </li></ul>
  9. 10. BENEFITS TO BUYERS <ul><li>Can finance 102% of appraised value, without getting cash back at closing (can get EMD, but no more) </li></ul><ul><li>No Monthly Mortgage Insurance </li></ul><ul><li>30-Year fixed rate with very competitive rates </li></ul><ul><li>No loan limits (DTI/income limitations) </li></ul><ul><li>Closing costs can be financed </li></ul><ul><li>Unlimited gift or seller contributions </li></ul><ul><li>No reserves required </li></ul>
  10. 11. Sales Price: Appraisal: Seller Paying: EMD: Closing/Prepaids 2% Funding Fee: $100,000 $110,000 $0 Closing Costs $500 $3,000/$2,000 $2,000 Can Finance: $107,000 and get $500 EMD back
  11. 12. Sales Price: Appraisal: Seller Paying: EMD: 2% Funding Fee: <ul><li>$100,000 </li></ul><ul><li>$105,000 </li></ul><ul><li>ALL Closing/Ppds. </li></ul><ul><li>$500 </li></ul><ul><li>$2,000 </li></ul>Can Finance: $102,000 and get $500 EMD back
  12. 13. QUALIFYING <ul><li>Debt to Income Ratios = 29/41 </li></ul><ul><li>Debt to Income Ratios = 31/43 </li></ul><ul><li>(for homes built after January, 2001) </li></ul><ul><li>Can go higher on DTI w/compensating factors: </li></ul><ul><ul><li>660+ Credit Score </li></ul></ul><ul><ul><li>Zero or very little payment shock </li></ul></ul><ul><ul><li>2+ years continuous employment at same job </li></ul></ul><ul><li>Rental/Housing history for 12 months required if credit score 619 or less (cancelled checks); if 620 or higher, not required </li></ul>
  13. 14. OTHER CRITERIA <ul><li>Do not own a dwelling currently </li></ul><ul><li>Lack sufficient resources to secure conventional credit </li></ul><ul><li>US Citizen, Permanent Resident, Resident Alien, or Qualified Alien </li></ul><ul><li>Have legal capacity to enter contract </li></ul><ul><li>Primary Residences Only </li></ul>
  14. 15. PROPERTY ELIGIBLITY <ul><li>Must have access from a street, road or driveway </li></ul><ul><li>Site value less than or equal to 30% of total value </li></ul><ul><li>Leasehold estates (where applicable) </li></ul>
  15. 16. OTHER PROPERTY REQUIREMENTS <ul><li>If on a well & septic, must be tested and meet county requirements </li></ul><ul><li>Pest inspection required – deficiencies must be corrected </li></ul><ul><li>Escrow for repairs under certain limited circumstances and will be 150% of cost </li></ul><ul><li>New construction – must have warranty </li></ul>
  16. 17. FUNDS AVAILABLE <ul><li>RD has annual amount of funds appropriated by Congress </li></ul><ul><li>Funds must be reserved by the lender but can’t be until there is a fully-executed sales contract </li></ul><ul><li>Reservation is valid for 60 days </li></ul><ul><li>Have been known to run out before end of fiscal year </li></ul>
  17. 18. QUESTIONS? Contact Jonathan Tafuri at 401.440.3374 or via email Jtafuri@agencylending.net

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