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USDA - RD
Loan Information

 

OneRay HOME PAGE USDA Fact Sheet USDA Eligile Area Map USDA Eligile Income Calculator LOAN PURCHASEAPPLICATION LOAN REFINANCE APPLICATION  

BENEFITS:

  • Loan amounts allowed up to conforming limit. Currently $417,000.
  • 100% Financing. $0.00 down payment.
  • No minimum buyer investment or contribution is required. Closing costs can be paid by:
    • Seller up to 6% of the sales price by including a seller contribution into the purchase offer and increasing the offered sales price accordingly. The original purchase contract must include the seller contribution. Seller paid costs cannot be added to the purchase contract by addendum after it has been executed.
    • Financing costs into the loan amount.
      • Costs can be added to the loan but only up to the amount by which the appraised value exceeds the contract sales price. For example, the appraisal is $173,000 and the contract price is $170,000. We can add $3,000 to the loan amount to pay closing costs because the home is appraised for $3,000 more than the sales price. In the case of a refinance, costs can be included up to 100% of the equity in the home.
      • Discount points may only be financed by low income applicants.
  • Allows the use of Gifts / Grants / MCC / DAP programs with no combined loan to value (CLTV) limits.
  • Low, 30 year fixed rates because of government guarantee. (90% Guaranteed) Since the government guarantees this loan, it is a safe loan and therefore we offer the best interest rates.
    • Effective with USDA Fiscal Year 2017 commitments after 10/01/2016
    • 1.0% Guarantee Fee. (Purchase or Refiannce) May be financed into the loan amount over and above the appraised value.
    • 0.35% Annual Guarantee Fee. (Purchase or Refinance) Paid monthly as part of your PITI payment.
  • No maximum purchase price or acreage limitations as long as the site value of the property is less than 30% of the overall value of the property unless it is typical for the area and the lot cannot be further subdivided.
  • 30 year FIXED rate mortgage loan only.
  • Available to US Citizens as well as all legal residents.
  • Streamline refinance without an appraisal is only offered when closing costs are not financed.

GUIDELINES:

  • Borrower -
    • Non-occupant co-borrowers are not allowed. All applicants must occupy the home.
    • 1st time home buyer is not required but may not own other "adequate" housing within local commuting area at the time of close.
    • Maximum income limits. Occupant's total combined household income is limited to 115% median area income adjusted for family size.
      • A family of 1-4 can earn up to about $6,229 per month. (2012 limits)
      • Click here to determine USDA Income Eligibility
      • Adjustments are made for children, elderly and disabled occupants.
      • Non-purchasing Spouse (NPS) income is used for 115% median income limitation regardless of occupancy unless 3+ months separation can be documented.
  • Refinance -
    • Refinance loans cannot include the pay-off of subordinate financing but may resubordinate without CLTV limits.
    • Refinance is only available if the current loan being paid off is also a USDA loan. Refinance from FHA, VA or conventional to USDA for example, is not allowed.
  • Impounds for property tax and home-owner's insurance are both required.
  • Rural Development (RD) Approval is required. Typically adds 2 to 5 days to required closing period.

QUALIFICATIONS:

  • Subject Property - Rural, owner occupied, one unit, residential properties only.
    • Property must be located outside of major metropolitan areas as per USDA eligibility map. May be verified as eligible location here: Eligible Areas Map
    • Site value of the property must be no more than 30% of the overall value of the property unless the appraiser states that it is typical for the area and the lot cannot be further subdivided.
    • The contributory value of any built-in swimming pool must be deducted from the appraised value. Pools are allowed but considered to be a luxury and not counted in value.
    • Additional units, crops, orchards, barns, stables and other property characteristics with income producing abilities or purposes are ineligible.
    • Homes must meet HUD Handbooks 4150.2 and 4905.1 (FHA) minimum property standards. These are the same health and safety requirements used for FHA loans.
    • The property appraisal must be performed by an FHA roster appraiser or a home inspection will be required.
    • All appraisal repairs must be completed prior to closing.
    • Appraisal must be less than 6 months old at the time of submission for conditional commitment from USDA.
    • The dwelling itself must not be in a Special Flood Hazard Area. (100 year floodplain)
    • Flipped properties, purchased for resale within the last 90 days, may be allowed without additional qualification. Subject to underwriter approval.
    Who is GUS?
    Government  Underwriting  System.
    Computer underwriting system used by USDA which allows extended approvals and documentation releif but FICO must be 640+ for all borrowers.
  • Credit - Must evidence reasonable ability and willingness to meet obligations as they become due.
    • Minimum 640 credit score is required from all applicants. (Middle of 3 scores or lowest of 2 scores is used.)
    • No minimum tradelines are required if GUS approved.
    • Credit report cannot be over 120 days old at time of close.
    • Coborrowers with no score or only one score will be considered as long as the primary borrower meets all standard credit guidelines. Manual underwriting is required.
    • Non-Purchasing Spouse's (NPS) credit must be obtained. Community property debts will be counted but the NPS's FICO will not be considered.
    • Clear CAIVRS is required.
    • Minor monthly installment debts with less than 6 payments left may be excluded from DTI inqualification.
    • Tax liens, judgments and delinquent government debt must be satisfied.
    • All Authoized User accounts must evidence 12 months payments by the applicant or the loan must downgraded to manual underwriting unless account owner is an applicant or spouse.
    • Disputed accounts must be removed or downgraded to manual underwriting unless zero balance, marked as "paid in full" or "resolved" or balance is less than $500 and over two (2) years old.
    • Manual underwriting is required when GUS approval is not obtained:
      • 12 months canceled rent checks or rental management company verification is required.
      • More than one 30 day late payment on consumer debt or rent in the last 12 months is not allowed.
      • Previous foreclosure, bankruptcy or any written off debt within 3 years is not allowed. Includes any P&L write off.
      • Unpaid collection accounts are not allowed and must be settled. Medical included.
      • Collection accounts opened within the last 12 months are not allowed. Medical included.
  • Income/Expenses - Debt To Income (DTI) guidelines are 29/41 and up to 38/50 as accepted by GUS with over 660 FICO along with stable employment, potential for increased income and ability to save.
    • Only applicant's income is used for loan qualification. Income of nonborrowing occupants and nonpurchasing spouses will not be counted for loan qualification DTI.
    • No DTI flexibility is allowed when payment shock is over 100% or applicants have no rental history. Payment shock is a measure of how much an applicant's monthly housing payment is increasing. Currently paying $800 monthly rent and going to a new mortgage PITI payment of $1,200 is a 50% payment shock. Doubling of the current rent would be a 100% shock.
    • Temporary interest rate buydowns are not allowed.
    • Continuous two year income history is typically required. Includes training/education periods.
    • IRA, 401(k) and liquid asset loans are not considered in the debt ratio.
    • Federal tax credits for child care costs count as income.
    • Monthly payments on deferred student loans are always included in monthly dept. A 1% payment estimate is used if no payment is indicated on the credit report.
    • Non-taxable income may be grossed up by applicable tax rate.
    • Farm and nonfarm business losses are counted as zero income.
    • Rental income from a home being vacated can never be counted in qualification.
    • Manual underwriting is required when GUS approval is not obtained:
      • Maximum 29/41 DTI.
      • DTI exception up to 32/44 may be allowed with 680+ FICO if compensating factors are present.
        • Stable employment - Long term with no changes or layoffs.
        • No payment shock - Documented history of rental payments.
        • Potential for increased income - Pending raise or promotion.
        • Ability to save - Paying your own closing costs or documented reserves after close.
  • Assets - None required if paid by the seller or financed into the loan. Applicants must not have enough savings to obtain a conventional 20% down payment mortgage loan.
    • Funds used to close must be fully sourced and seasoned for the last 60 days.
    • Cash and deposits that cannot be tracked or sourced cannot be used for closing.
    • Cash and undocumented deposits into verified accounts may poison the verified funds and cause them to be disqualified.
    • Gift funds are allowed from family or family like relationships but must also be sourced and seasoned for 60 days.
    • Earnest money deposit must be evidenced to have come from and cleared the buyer's account. Cashiers check plus receipt showing the source of funds is required.
    • Reserves are not required. No savings needs to be left over after the home purchase but any documented reserves after close will help approve the loan.
    • Liquid reserves over $5,000 will be considered as income producing at passbook rates.