November 21st, 2011 | Featured Loan Programs
This is a 100% Purchase program for homes in eligible areas that meet the income limits for that area.
A 2% fee for Rural Housing is added to the loan. Do not use any other method to calculate the loan amount. This fee is tax deductible. There is no monthly fee for Rural Housing, or any PMI.
Seller contribution limits for closing costs on the loan is six percent. If the contributions are going to be higher, the appraiser has to certify that it has not impact on the value of the home.
The loan can always be based on the appraised value, rather than the purchase price. If the appraised value is over the purchase price, that money can be used for closing costs, appliances or improvements or repairs to the house. The property cannot have any “farm specific” buildings such as a silo or hog barn. USDA will not do a loan for a property that has an inground swimming pool.
If they are doing work on the house, it cannot be structural in nature. It can not involve walls, foundation work or roofing as the house has to be inhabitable and ready for move in when they buy it.
For work to be done, or appliance that will be purchased, you only need one bid from whoever the buyer wants to have the work done by. The buyer cannot do the work their selves. For work that is done before the papers are signed, you would show the contractor on the HUD and have a check cut to them. On work to be done after the sale of the property, we would hold back 150% of the bid. The 50% extra would need to be brought to closing by the buyer. Appliances do not have to be installed prior to closing and do not require the 150% hold back.
For income qualifying the system counts everyone that lives in the house to include grandparents and anyone else. You would use all of the income in the house, even if they are not on the loan. They system will take off adjustments for children under 18, over age 62, disabled persons and credit for any money paid out for child care. There is no credit for child support.
There are no loan amount limits, but you would be limited by the income level. Also, there are no asset or reserve requirements, but they can be an offsetting factor for you customer.
This program should be offered to applicants with a 620 credit score or higher. There is no seasoning on past due credit if the client is approved by the GUS underwriting system, which we have access to. If there is a bankruptcy, and the borrower has at least a 680 credit score, seasoning on the bankruptcy can be waived if GUS approves the loan. The circumstances that caused the delinquency should be beyond the customers control, they had to be temporary in nature, and the situation has to be corrected so that it will not happen again. The credit problems should be limited to one time frame as Rural Housing is not looking for someone that continually has payment problems.
The income ratios are 29/41, but can be waived above 620 with a very good reason, or if above 660, no reason is needed. There is a payment shock factor of 100%.
Collections to be paid are at the underwriter discretion, but if the score is above 620 they can waive most of them.
Appraisal is to be on the 1004 form, however, if an FHA designated appraiser does it, then they will waive all of their inspections except for drinkability if there is a well as long as the appraiser does not ask for any, and states that the house meets the guidelines of HUD handbooks 4150.2 and 4905.1.
Below is the website to use to see if your property is in a qualifying area, and where you can do an income analysis to be sure your customer meets the guidelines. Be sure to count all people in the house and do not forget to credit child care if they pay it.