You've heard it here before--this product, sponsored by USDA Rural Development, allows borrowers to get 100% financing at a low fixed interest rate if the property is in designated rural areas--which aren't limited to the back of beyond. Property just outside city limits is often considered rural for the purposes of geting these loans. But you may have to hurry. According to ForexHound, the number of home loans guaranteed by the USDA ballooned to nearly 120,000 in the first nine months of 2009, up from roughly 35,000 in all of 2007. But given the amount of development in outskirts all over the US, fewer areas are truly rural and once the population is sufficient they will be taken off the rolls.
Bank Saying No to USDA
One of the largest banks in America is discontuing rural housing mortgages, and it may not be the only one. With the possibility of these mortgages going away and the discontinuence of the first time home buyer credit in November, low-to-moderate income home buyers need to move very fast. if you haven't called your bank, do it now. Get approved, not just prequalified--you want to be ready to pull the trigger as soon as you find a house.
100% mortgages have not gone completely by the wayside. While layering risk by lending to borrowers with low credit scores + no down payment + no income documentation will no longer fly (good!), there are programs out there for those who don't face all of those challenges. The USDA Rural Development home loan is one such option. What is rural? The USDA has defined rural as anything not "places of 50,000 or more people and their adjacent and contiguous urbanized areas."
USDA Rural Development administers a couple of programs: Guarantee and Direct. Their Direct program is funded directly (hence the name "direct," duh) through the rural development office. To be eligible, your income can be only 80% of the median income for the area.
The Guarantee program is funded thorugh USDA-approved lenders and brokers. It is a guaranteeprogram (duh, again!)with no subsidies, and the income guidelines allow up to 115% of the median income after certain adjustments. A good loan officer who specializes in these products should be able to help you determine how your income would be considered.
The 100% LTV mortgage amount is determined by the appraised value instead of the purchase price. Credit underwriting is flexible and the guidelines have no minimum buyer out-of-pocket expense and no maximum for seller concessions. Note: some lender policies may be more restrictive, so if it's the lender guidelines shooting down your application and not the USDA's, another lender may be able to approve you.
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Specializing in Bad Credit Mortgages… Because Life Doesn’t Always Turn Out Like You Planned. A sick child, a few late bills, or an unexpected expense can easily get you off track and your credit may suffer, but we don't think you should miss out on the opportunities available to everyone else.
Gina Pogol
About the Author:
Gina Pogol writes for an online media company about mortgage and finance. In addition to a decade in mortgage lending, she formerly consulted for Experian and other credit bureaus, and worked as a tax accountant for Deloitte. She has a BS in Financial Management from the University of Nevada.
