Tuesday, May 18, 2010 - Article by: Lender411 Member
Designed as a resource for low to moderate income homeowners in rural communities, the USDA Guaranteed Rural Home Loan has helped many Oregon families obtain financing for homes not only in rural areas, but also in cities such as Sherwood, Newberg, Wilsonville, Forest Grove, Canby, Coos Bay and Klamath Falls,
While the USDA has guaranteed this loan, the money actually comes from traditional lenders like Golf Savings Bank. We underwrite the loan based on USDA guidelines and then sell it on the secondary market, just like a traditional loan.
One of the most attractive characteristics of the USDA Guaranteed Rural Home Loan is that it is one of the last home loans with 100% financing. I have helped many home owners get into a home with no money down. In fact, they usually are able to get their Earnest Money back as well.
The program also allows for 6% Seller Concessions to help cover the cost of the Buyers Closing Costs. Rates are very competitive with conforming and FHA loans, and there is no monthly mortgage insurance payment.
<p _extended="true">The two main qualifiers of the USDA Guaranteed Rural Home Loan program are:</p>
The loan is undergoing some changes right now. Traditionally, the USDA will provide financing up to 102% of the appraised value of the home. This covers the 2% Guarantee Fee that is mandated by Congress to help repay the cost of this program. Historically, this program runs out of money every year and then is funded again by Congress. Over the last 2 years, the program has exhausted it's funds in the Spring. Last year it was quickly funded, this year, not so. The program is currently out of funds and is awaiting Congressional funding.
There is a Bill before Congress to make the USDA Guaranteed Rural Home Loan self-funding. This will enable the program to continue to exist without the need for Congress to continually allocate for funds. The Rural Housing Preservation and Stabilization Act increases the maximum loan guarantee fee that USDA's Rural Housing Service has authority to charge for new housing purchases from 2.0 to 3.5 percent and allows an annual fee of not more than 0.5 percent per year on the balance of the loan. This will result in a nominal increased monthly payment of around $8 per $100,000 at 5% Interest Rate.
A modified version of the Rural Housing Preservation and Stabilization Act has been added to H.R. 4899, the Disaster Relief and Summer Jobs Act of 2010 and will hopefully be voted on soon.
We are still accepting applications based on the 3.5% Guarantee Fee, underwriting them and then putting them in suspense until the USDA gives us further direction.
If you need to close soon, I suggest using an FHA or conforming loan. If you have the luxury of waiting a few more weeks or months, than this is still the best loan on the market if you don't have 20% down payment and you and your property qualify.
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Larry Morris is a Certified Mortgage Planning Specialist and Certified Mortgage Coach with Golf Savings Bank in Beaverton, Oregon. He specializes in USDA Guaranteed Rural Home Loans, FHA Purchase and Refinance, FHA 203k Rehab loans, FannieMae HomePath loans and conforming purchase and refinances in the states of Oregon, Washington, Idaho and California.
He can be reached at 503-421-0096, or larry@PDX-Mortgage.com.
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