Wednesday, April 28, 2010
4/28/2010 04:23:00 PM | Posted by
Arbor Mortgage
One of the best, and most under appreciated, home purchase loans today is the USDA Rural Development Section 502 Guaranteed loan. This program is a $0 down purchase loan intended for rural America. These loans are for buyers with low to moderate income that are purchasing homes that fall within the USDA’s rural maps. The maps happen to be very outdated, meaning that there are many places you or I wouldn’t consider rural, that actually qualify for 100% financing.These loans aren’t just great for buyers, but for lenders, too. The lender funds the loan, but the USDA Guarantees it up to 90% of the original loan amount – that’s far and away better than conventional mortgage insurance. Guarantee funds aren’t unlimited, though. In the past, it has taken an act of Congress each year to appropriate funds for the program.
With credit becoming tighter every day, more and more people are turning to this (used to be) little know loan product to secure $0 down financing. As a result, those congressionally appointed funds are running out faster and faster. In 2009, the program ran out of funds midyear, only to be funded again by the stimulus package. Funds are again running low and are not expected to be available past May. Many lenders stopped taking applications a month ago, in anticipation of the funds being drained, with no hope for Congress to step in.
Luckily, there has been a new bill introduced to turn the USDA into a self funded program. H.R. 5017 has already been approved by the House of Representatives, but has not yet been introduced in the Senate. The bill authorizes up to $30 billion in loans during the 2010 fiscal year. In order to make the program self-funded, the Guarantee fee, paid by the home buyer, would be increased from 2% to as much as 4%. While this is a hefty fee increase, this is one of few programs with no monthly mortgage insurance, even at 100% financing.
This bill is more important than ever, because this loan program aids an under served community. Lower income families in rural communities often have less financing options than those in urban areas. This program is also the only option for many people to secure 100% financing. Loan guidelines allow buyers to finance their closing costs and even appliance purchases up to the appraised value of the home. There is no other loan program like it.
For more information on USDA Rural Development loans, Contact Us.
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- Arbor Mortgage
- Arbor Mortgage is a Michigan based mortgage lender that has been providing mortgage solutions for more than a decade. Since 1998, Arbor Mortgage has helped more than 20,000 people purchase or refinance their homes. Arbor offers a variety of mortgage programs including FHA, USDA Rural Development, VA, Conventional and Alternative loans.
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