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***USDA - 11 Things You Should Know

Monday, October 10, 2011 - Article by: DOUG CAPPS - Guaranty Bank and Trust Co - Message

The USDA Guaranteed Rural Housing (GRH) loan program has seen some recent changes which became effective 10/1/2011 - decreasing the Funding Fee back to 2.00% and the implementation of a new Annual Fee (much like monthly mortgage insurance). Even with these changes, the USDA GRH loan is one of the best mortgage options available to many borrowers.

  1. NOW FUNDING - USDA has begun issuing "Subject to conditional commitments" and as in the prior years, Fairway Mortgage will continue to CLOSE and FUND USDA loans during this period!
  2. USDA Rural Development have TWO different loans - Rural Development loans are broken down into two different loan types: USDA Guaranteed Rural Housing (GRH) Loans and USDA Direct Loans (Section 502 Single Family Direct Loan). USDA GRH loans are originated through local Lenders, Banks and Brokers. The USDA Direct Loan is originated directly through the USDA local offices. There are distinct benefits of each program.
  3. 100% Financing - NO down payment. Can go up to 102% with financing the 2.00% USDA Funding Fee.
  4. NEW Annual Fee - Compared to FHA and conventional mortgages, mortgage payments on USDA loans are LESS even with the new Annual Fee. The .30% annual fee is calculated as follows: - - Initial fee for the first year will be based upon the loan amount and escrowed into the borrower's mortgage payment. - - The fee will be calculated annually based upon the unpaid principle balance. - - Annual fee will paid for the life of the loan.
  5. Finance Closing Costs - Borrower's closing costs/pre-paid items can be financed into the loan as long as there is room between the purchase price and the appraised value. NO other loan program allows for this!
  6. NO Loan Limit - Unlike FHA or Down Payment Assistance programs, GRH loans have no maximum sales price limitation. The maximum sales price allowed is determined specifically by the borrower's financial situation (income limits do apply: family unit 1-4 = $74,050.00 and 5-8 = $97,750.00).
  7. NO First-Time Home Buyer Requirement - You don't have to be a first-time home buyer to benefit from this program. Under certain circumstances, you can even own another home!
  8. NO Limit to Seller Contributions - Most lenders/investors stick to the 6% rule.
  9. Appraisal Requirements - The appraisal requirements for RD loans are similar to standard conventional loans.
  10. In-ground Pools - In-ground pools are allowed "as long as" the pool does not have any contributing value to the appraisal. Any contributing value must be reduced from the sales price or the difference paid by the borrower.
  11. Prohibited Loan Purposes - Please reference AN 4590. This Administrative Notice covers: Outbuildings, Farm land, Eligible/Ineligible facilities, Income- producing land or buildings. Acreage and site value limitations.

For more information please contact DOUG CAPPS at (662) 429-5100 ext. 105. NMLS ID #68160.

Fairway Independent Mortgage Corporation, 224 West Commerce St, Hernando, MS 38632 is a "MS and TN Licensed Mortgage Company." NMLS ID #2289. An Equal Housing Lender. All loans are subject to credit approval and compliance with investor guidelines.

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