H Coordinator NACS DRAFT 6/13/05

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2 H Coordinator NACS DRAFT 6/13/05

3 What I miss.. NACS DRAFT 6/13/05

4 What I don t miss. NACS DRAFT 6/13/05

5 USDA, Rural Development Guaranteed Rural Housing Benefits Direct Single Family Housing Applicant (and Realtor benefits) Applicant Eligibility Property Eligibility The Process Resources Available

6 United States Department of Agriculture Rural Development Business & Cooperative Utilities Community Facilities Housing Multi-Family Housing Single Family Housing 502 Direct 502 Guaranteed 504 Loan & Grant

7 Guaranteed Rural Housing (GRH) Loan made, held, and/or serviced by an approved GRH lender Guaranteed against loss by USDA

8 Home Buyer Benefits 101% LTV 0.35% of principal balance annual fee 30 Year Fixed Rate No Loan Limit Partner with other Funding Sources NRHA s and NHD MCC & DPA Programs Fees & Repairs may be Financed Seller Contributions and Gifts permitted New Construction and Manufactured Homes No Reserves Required

9 Lender Benefits 101% LTV Saleable to Secondary Market Lender Profitability Quick Review Turn Around by RD Guaranteed by Government Lender Underwrites Loan Quality Customer Service

10 Rate and Term 30-Year Fixed Interest Rate Set by Approved Lender Not higher than the 30-year, 90-day actual/actual Fannie Mae rate plus 100 basis points _tools/net_yields/db_rate_chart.jhtml - Or - Lender s Published VA Rate One-Time GRH Fee 1% Purchase + minmal 0.35% Annual Fee

11 FEE.. Purchase Price (base) $250, $250, X 1% = $2,500 $2,500X 1% = $25 $25 X 1% = $.25 $2,500 + $25 = $2,525 Total loan=$252,525 Total Fee= $2,525 NACS DRAFT 6/13/05

12 USDA/Rural Development (RD) 502 Direct Loan made, held, and serviced by USDA/RD Funded through the United States of America s Federal budget

13 Home Buyer Benefits 100% LTV No PMI 30, 33 or 38 Year Fixed Rate Flexible underwriting Low rates May receive subsidy Fees & Repairs may be Financed Unlimited Gifts or Seller Contributions No Reserves Required

14 Realtor Benefits 100% financing+ favorable rates and terms = more buying power Resulting in more flexibility in house shopping and bigger commissions NACS DRAFT 6/13/05

15 GRH loans get held up at USDA for weeks False: loans submitted to USDA Nevada are reviewed within 48 hours of receipt USDA runs out of money causing deals to fall apart Some truth: The GRH tends to be more fluid during the transition from one fiscal year to the next there can be delays in funding for the Direct loan. NACS DRAFT 6/13/05

16 USDA restricts where and what I can buy Some truth Must be in an eligible rural area Must meet the modest guidelines for direct Must meet certain property standards Only for Very Low income first time buyers False You need not be a first time buyer but the home must be your primary residence and there are restrictions about owning another property GRH allows up to 115% of median income NACS DRAFT 6/13/05

17 Purchase New Purchase Existing Repairs Refinance Loan Purposes Rural Development Direct Guaranteed Loan Typical Loan Closing Costs

18 Prohibited Purposes Furniture & Personal Property Existing Manufactured Home Income Producing Property Non-Essential Buildings & Land No In ground Pools For Direct Only

19 Single-Family Housing Guaranteed Loans Combination Construction-to-Permanent Loans What does this program do? Lenders and homebuilders participating in the Single-Family Housing Guaranteed Loan Program now have a new tool to expand access to affordable rural housing and increase financing opportunities for lowto moderate-income applicants. Our new combination construction-to-permanent loan, also called a single close loan, allows approved lenders to close a new construction loan and receive a loan note guarantee before construction begins. NACS DRAFT 6/13/05

20 Income Household adjusted annual income may not exceed the MODERATE INCOME limit for GRH (115% median) and Low (80 % median) for Direct Limits based on family size & Area where the property is located Income & Property Eligibility web site at:

21 Adjusted Annual Income Income of all Adult Household Members Gross income OT, commissions, bonuses, etc. Net self-employment income SS, child support, unemployment, etc.

22 Adjusted Annual Income Adjustments $480/annual per minor or full-time student Verified child care expenses $400/annual where borrower or coborrower is elderly or disabled Income earned by full time students that are not on the note is not included in the annual income

23 Repayment Income Adequate & Dependable Income Repayment Income Adjusted Annual Income OT, commission, self-employment, & bonus income should have a 24 mo. history Earned Income Credit may be added Non-taxable income may be grossed-up MCC can add to monthly income for repayment to reduce housing ratio.

24 PITI 29.0% Repayment Ability TD 41.0% Include all debts 10 months May exceed Ratio Limits with documented compensating factors such as: Negative payment shock 2+ years on the job 3 months reserves Not to exceed 32/43 Must have mid FICO 680 for ratio waiver

25 Verification Credit Verification Residential Mortgage Credit Report (RMCR) Tri-Merged Credit Report Credit Alert Interactive Voice Response System (CAIVRS) Rent History 12 months Required only if FICO < 680

26 Credit History o No Credit Lines Bad Credit o Scores NO MINIMUM o 640 generally considered good risk o < 640 review per Rural Development Regulations o Credit Waiver from Lender s Underwriter o Temporary circumstances, o Beyond applicant s control, o and Circumstances removed; o or o Justifiable Dispute

27 Other Criteria Do not own a suitable dwelling Insufficient resources to secure conventional credit without the Guarantee U.S. Citizen or Permanent Resident or Qualified Alien Legal Capacity Primary Residence

28 Site Eligibility Must be in Rural Area Access from a Street, Road or Driveway Environmental Desk Review by Rural Development Staff Leasehold Estates (where applicable)

29 Existing Property Property must comply with HUD Handbook (GRH) Independent inspection report reviewed by RD (Direct) Contract with FHA appraiser to complete URAR. Deficiencies must be corrected. Water Test must meet Local Health Department requirement.. Must meet local guidelines for septic per HUD HB

30 New Homes Agency or local Building Inspector insures specific inspections have been performed (Direct) Lender insures required inspections have been performed (Guarantee) Wells and septic systems must be approved by local government agency. + 1 Year Builder s Warranty Or 10 Year Builder s Warranty from approved company in lieu of required inspections

31 Repairs/renovations May be included in the Loan for both Direct and Guarantee Completed prior to issuance of the Loan Note Guarantee Minor repairs can be post LNG Escrow of repairs permitted under certain limited circumstances

32 The Process GRH Lender accepts application. Lender pre-qualifies application. Lender processes application. Lender submits fully underwritten application.

33 The Process GRH Rural Development issues Conditional Commitment within 48 hours. Lender closes loan. Lender submits closing package to Rural Development. Rural Development issues Loan Note Guarantee to Lender within 10 days

34 The Process (Direct) Applicant submits a prequal application After initial review applicant submits full application If eligible RD issues a Certificate of Eligibility (COE) Applicant looks for a house NACS DRAFT 6/13/05

35 The Process (Direct) Applicant forwards accepted offer to RD Inspection reports are submitted for review Proceed to closing Applicant becomes borrower NACS DRAFT 6/13/05

36 Link to GovDelivery ARD_25 Get updates on USDA GRH sent to your Link to our website Discover all USDA/Rural Development has to offer Eligibility Website: Use this to determine property and income eligibility Lender Interactive Network Connection (LINC): Training Resource Library Excellent source for new lenders or to refresh your knowledge NACS DRAFT 6/13/05

37 Questions?

38 Ticia L Weare State SFH Coordinator Rural Development U.S. Department of Agriculture 7080 La Cienega Street Suite # 100, Las Vegas, NV Phone: ext. 102 Fax: Committed to the future of rural communities Stay Connected with USDA: USDA is an equal opportunity provider, employer and lender.