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Rural Development

Housing & Community Facilities Programs

 

 

QUICK GUIDE

USDA, RURAL DEVELOPMENT

GUARANTEED RURAL HOUSING LOAN  

 

Advantages:

  • No Down Payment Required

  • 30 year fixed rate

  • 100% LTV plus the guarantee fee, if financed

  • Finance Closing Costs, if market value is sufficient

  • Expanded Ratios of 29/41%

  • No Mortgage Insurance

  • No cash contribution required from borrower

  • Unrestricted gifts

  • No Maximum Loan Amount - loan amount based on repayment ability of applicant

  • No Reserve Requirement

  • High earnings potential

  • Competitive rates (set by underwriting lenders)

  • Available secondary markets: wholesale lenders as well as Fannie Mae and Freddie Mac.

  • Utilize in Conjunction with State Housing Authorities, if available

 

Rural Development designated rural area:

  • Homes must be located in rural areas.  Rural areas include open country and places with a population of 10,000 or less and-under certain conditions-towns and cities with between 10,000 and 25,000 residents.  See the rural area eligibility site at http://eligibility.sc.egov.usda.gov, click on “property eligibility”.  If you need additional assistance, please contact your local Rural Development office.

 

Acceptable credit history:

  • Have a credit history that indicates a reasonable willingness to meet obligations as they become due

  • Lender underwrites the loan

  • No minimum credit scores

  • Lack of credit is not derogatory

  • Caution for applicant(s) with multiple layers of risk such as:

    • payment shock; low credit scores; ratio waiver; credit waivers; 2-1 buy downs

 

Check maximum income for eligibility:

Applicant(s) have an adjusted household income that does not exceed the moderate income limit established for the area.  A family’s income includes the total gross income of the applicant, co-applicant and any other adults in the household.  Applicants may be eligible to make certain adjustments to gross income-such as annual child care expenses and $480 for each minor child-in order to qualify.  USDA Rural Development field offices can provide information on the moderate income limits for the areas that fall within their jurisdictions, and can provide further guidance on calculating household income.  There is an automated eligibility calculator at: http://eligibility.sc.egov.usda.gov

 

Applicant(s) repayment ability:

The ratio limits are 29 front (housing, PITI), 41 back (total debt, MOTI).  Rural Development allows expanded repayment ratios if the applicants have sufficient compensating factors. The underwriter must recommend the expanded ratio(s) and provide compensating factors to Rural Development.  Rural Development must concur with the underwriter’s recommendation in order to expand the ratios.

Other eligibility criteria:

  • Do not own a dwelling

  • Insufficient resources to secure conventional financing without the guarantee

  • U.S. citizen or permanent resident or qualified alien

  • Legal capacity

  • Primary residence

 

Loan-To-Value (LTV) and Loan Limit:

  • 100% LTV plus the amount of the guarantee fee, if financed

  • Loan amount can exceed appraised value by the amount of the guarantee fee

  • There is no loan limit

 -Limiting factors will be ratios and income limit

 

Property requirements:

  • New or proposed home construction - stick built, modular, townhouses, condominiums, new manufactured homes.

  • Existing homes: Meet requirements of HUD Handbooks 4905.1 and 4150.2 

  • New and existing: Private well water quality must meet local and state code. 

 

FHA appraisers in the area can be found on the FHA web site: https://entp.hud.gov/idapp/html/apprlook.cfm

 

Existing (previously occupied) manufactured home financed under limited circumstances when home presently financed by USDA.

 

New manufactured homes:  Rural Development will finance new manufactured homes through approved dealer-contractors.  Contact your local Rural Development office for a list of approved dealer-contractors and the specifics of how new manufactured homes can be financed.

 

Modular homes:  New or existing modular homes can be financed the same as stick built homes.

 

Condo:  Rural Development can finance if it meets the standards for Fannie Mae, Freddie Mac, VA, or FHA.

 

Town home:  Same as condo.  A town home must have provisions for maintenance such as HOA.

 

Flood Zone:

Any existing improvements located in a special flood hazard area must have federal flood insurance coverage.  New construction is not permitted until a Letter of Map Revision/Amendment is issued by FEMA. 

 

One time guarantee fee based on the final loan amount

This fee can be financed along with other closing costs.  The first mortgage guaranteed loan cannot exceed appraised value by more than the amount of the fee financed.  No mortgage insurance requirement.

 

Term: 30 year fixed

 

 

Interest Rate:

  • Fannie Mae 90 day delivery plus 60 basis points rounded to the nearest quarter percent or

  • The lenders published VA rate with no discount points

 

Prohibited Loan Purposes:

  • In-ground swimming pools - unless value is deducted from the loan request

  • Existing manufactured homes

  • Construction draws

  • Furniture and personal property

  • Income producing property

  • Non-essential buildings and land

 

Additional resources:

 

THIS IS A QUICK GUIDE OF THE RURAL DEVELOPMENT GUARANTEED RURAL HOUSING PROGRAM.  FOR ADDITONAL INFORMATION, CONTACT YOUR LOCAL RURAL DEVELOPMENT OFFICE.

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