USDA Rural Housing Loans
USDA Rural Housing Loans are great home loans with lending guidelines that are a little less stringent that most other loan programs’ guidelins. The catch is that only certain properties will qualify for this loan, and as a borrower you are expected to meet certain criteria that you otherwise would not have to concern yourself with, for example, having to sign off on promising to live in the property at least 6 weeks a year.
To check the eligibility of a property for a USDA Rural Housing loan, click here.
There are some changes coming to the USDA 502GRH Housing Loan Program coming in 2015. Below Banner Mortgage has outlined the major changes.
SDA 502GRH Housing Loan Program Changes:
- Program still has a no minimum credit score requirement
- At least one applicant whose income and assets are used for qualification purposes must have 3 tradelines for 12 months (the tradelines can be open/closed/disputed/authorized use). GUS “Accept” recommendations that cannot meet these guidelines must be downgraded to “Refer”. In the case a loan has been downgraded , non-traditional credit is allowed.
- Loan Note Guarantees will be electronically issued beginning December 1, 2014
- Flood zones are now allowed on existing homes as long as flood insurance through FEMA’s NFIP program is available (flood elevation certificate is no longer required)
- New or proposed homes in flood zones will need an elevation certificate, the home and all improvements must be above the 100 year flood plain.
- Flood insurance is not required for additional detached structures from primary residence, additional structures on property (sheds, garages, etc.)
- Seller concessions are now limited to 6% of the property’s sales price. Closing costs/pre-paids from lender through premium pricing are excluded in contribution limit.
- Discount fees only allowed to be financed to reduce the interest rate. The financing of discount points is limited to low income applicants only. The total discount cannot be more than 2 points of the loan amount. Discount points and origination fees must be itemized separately on the settlement statement.
- Gift funds should not be included in reserve total calculation.
- Gifts funds from household members are now allowed.
- Any request to release GUS for data updates after the issuance of the Conditional Commitment will be treated as a new request, processed in date and order of applications received.
- The validity period of an appraisal will be 120 days, unless otherwise provided by the agency.
- Current homeowners are eligible for a USDA loan as long as the following are met: applicants not financially responsible for another USDA loan at loan closing, current home no longer meets the applicant’s needs, must occupy as a primary residence, applicants must be without resources or credit to obtain home and only one home can be retained.
- Applicants must be financially qualified to own more than one home. Rule of owning home within 50 mile commute has been removed.
- If borrower retains current home, they must document significant status change of borrower that requires immediate remedy. If there is overcrowding in the current home, borrower must be able to document there are more than 1.5 household members per room and document overcrowding has existed for more than 90 days and will persist for 9 month into the future. If the borrower needs to purchase another home due to a disability, the lender must document substantial retrofitting of current dwelling would be required.
- In all cases involving retaining a dwelling; the lender must provide explanation of applicant burden imposed by status change in near and long term future and document reasons beyond homeowner convenience, why the purchase of the new home must occur prior to the sale of the existing home.
- Credit reports cannot be more than 120 days old when the loan is closed. This rule now applies to new construction as well.
- If the collection balance is equal to $2,000 or greater, the underwriter must; require payment in full or verify payment arrangement with creditor and include monthly payment in ratios, or utilize 5% of each loan balance in debt ratios.
- If the collection balance is less than $2,000, the underwriter determines if payment in full is required, underwriter must document the decision. Applicants that demonstrate poor repayment of obligations should not be granted underwriting exceptions.
- Medical collections do not have to be paid.
- Federal judgments must be paid no exceptions allowed. Non-federal judgments may remain open IF there is evidence of repayment for 3 months prior to loan application. Prepayment for the 3 months is NOT allowed.
- When determining student loan payments, include the greater of 1% of the outstanding loan balance or the verified fixed payment reflected on the credit report. Monthly payments on credit report less than 1% of loan balance may be used when evidence from loan servicer verifies applicant is on a fixed repayment plan that is not subject to change.
- Long term debts with more than 10 months remaining must be included in the debt ratios. Rule of 6 months or less was removed.
- Mortgage Credit Certificates are allowed. Lender may consider the tax credit as a deduction from the monthly PITI payment.
- Payments for foster children and adults are not eligible for repayment income. Supplemental Nutrition Assistance Programs payments are no longer able to be used for repayment income.
- Lender must verify income for all household members for previous 2 years. Lenders must require each household member to complete and execute a 4506-T.
- Non-taxable income may be grossed up by 125% for repayment purposes. Tax tables are no longer required. Do not gross up non –taxable income for income eligibility purposes.
- Income producing properties are now allowed as long as the income generated from the property is not the main income source.
- Site value restriction of 30% no longer applies. Site must be typical for area and cannot include income producing land or buildings to be used principally for income purposes.
- The deduction of contributory value from the appraisal is no longer required for pools and outbuildings. In-ground pools are now allowed.
- Barns used for storage are permitted. Home based operations are now allowed ( childcare ).
- Properties served by cisterns are no longer acceptable.
- Shared driveways must have recorded easements. Private streets must have recorded easement or be maintained by a HOA.