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Old 08-05-2013, 07:39 PM
 
49 posts, read 271,096 times
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I have been hearing a lot about the USDA loans recently from a co-worker who bought a lovely home and a friend and her husband who bought a great townhouse. I am thinking that if me and my husband save like maniacs AND he gets the full-time position that we are hoping for, we'll be able to save the 20% needed for a traditional loan in about 2-3 years.

The other option would be to save up enough money with my income (I have a nice professional position) and go for an FHA loan in about 1.5 years, maybe a touch sooner but I don't know if we would definitely qualify for that since I have been working in my position for less than 1 year even though it is extremely steady and reliable.

My last and quickest option would be to go for the USDA loan and buy the same townhouse I could afford with the FHA or the conventional loan but get it within the year. I checked and I qualify and it looks like because of my profession and income, I will qualify for an awesome savings program called, 'homes for heroes'.

Would anyone have any good suggestions to think about or provide some insight on these loans? I am really just in the researching stage at this point but I would also be interested in books, articles, data that anyone might be able to provide me with .

Thanks!
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Old 08-05-2013, 08:57 PM
 
3,317 posts, read 7,251,326 times
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I've been doing all three loan types for a long (too long) time, and am also a Homes For Heroes Partner. H4H will credit your closing costs a bit, and you can get the seller to pay the rest. you can literally get an incredible rate with zero out of pocket, besides the appraisal cost, with a USDA loan. Your mortgage insurance is 1/3 of FHA. USDA is better, if you and the home qualify.

By the time you save up 20%, rates will likely be several points higher, and there will be fewer homes, at higher prices - probably. Not making any guarantees here, but I'm a "worst-case scenario" thinker.

Pull the trigger now, go USDA, negotiate the seller into paying all of your taxes/insurance/fees due at closing, and lock into an amazing rate. Get the home you want.

WAIT - - if you qualify for Homes For Heroes, are you a Veteran?
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Old 08-06-2013, 03:34 PM
 
49 posts, read 271,096 times
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I qualify (according to the staff member who emailed me back) because I'm a social worker. I heard about it from a friend who is a nurse who told me that she thought I'd qualify. I looked it up and they include nurses, teachers, veterans, ect. basically anyone in the 'helping' profession who makes under the income cap. I haven't heard back from them though but that would be so wonderful if I could afford a home.
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Old 08-06-2013, 08:37 PM
 
Location: Austin
7,077 posts, read 16,885,085 times
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The Homes for Heroes is not a mortgage program. You get a regular mortgage, whichever one you qualify for. The Realtor you use has to be signed up for the program, and the Realtor gives you 25% of their commission to use towards your closing costs. There is nothing to "qualify" for.

Good luck finding a participating Realtor. On the Realtor's side, there is a lot more fees involved, more than just paying out 25% to the buyer, and not many agents agree with the way the program is handled. With that, there will be very few agents to choose from, and the ones available might not be the best/better agents around.
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Old 02-16-2014, 11:20 AM
 
1 posts, read 13,258 times
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As I understand, there are three basic loan types. FHA, Conventional and VA. With that being said, a USDA loan is actually a Conventional loan, modified so that farmers could buy large acreages without a large money down impact and without mortgage insurance (hence, the term "Farmers Loan"). Then in 2009 USDA opened the gates for smaller residential properties in selected areas not in metropolitan areas with the general guidelines as a traditional Conventional loan but with modified guidelines.
What I did not know is that USDA allows absolutely no value for a pool when it comes to appraisals. Or at least that is what I was told by a mortgage broker. Can you confirm my statement about the understanding of types of loans and especially the appraisal not including a pool? Urgent!
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Old 02-16-2014, 02:53 PM
 
3,317 posts, read 7,251,326 times
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USDA no likey swimmin' holes at all. And they do charge a rolled-in 2.04% Mortgage Insurance Policy, backed by a monthly one of 40 bps.
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Old 02-16-2014, 03:34 PM
 
Location: MID ATLANTIC
7,598 posts, read 17,614,249 times
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OP, I recommend you sit down with a loan officer or an agent that understands first time homebuyer programs. The reason I say this is most banks have CRA products (Community Reinvestment Act), where the banks pledge to invest in the community we serve. Most banks have such a product and every program is different. It is very possible you and your husband qualify, right now, for a low down payment no PMI loan. No one is going to force you to buy right now. But someone that specializes in first time buyers can run the payments for each loan program, as well as, the total cash required for the transaction. Did you know the Federal Home Loan Bank gives out grants to it's member banks? For example, for every $1 you put in, they will contribute $3, up to $7500. Many programs allow gifts for down payment. Combine that with a low down payment program with no PMI and you could be well ahead of the game. We just lowered one family's housing payment by $110 and they only needed $1500 out of pocket. (This was an exceptional transaction, but it is not uncommon to see your mortgage payment near or lower than your rental payment).

And, while you are looking at the loan programs, you can be evaluating what loan officer/agent you want to work with in the future. Be very clear about your time-table and do not go out looking until that time otherwise, you will get caught up in the hunt. (If they push, eliminate them - you can go to open houses if you need to get an idea what a certain price range will buy). Do not have your credit pulled more than once. Find someone that will give you a copy of your credit report or get your own copy. You don't need actual scores right now, anyway, any credit pulled today expires in May.

You have the right idea - you are trying to narrow down the target. But you are at a point where a message board cannot tell you what is right for you. Keep reading here, education is the key to a satisfactory purchase experience. Usually those that have bad experiences were not given realistic/accurate expectations by their loan officer, bank/mortgage company and Realtor. Keep asking lots of questions.....
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Old 02-18-2014, 09:27 PM
 
Location: South Texas
478 posts, read 827,225 times
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Quote:
Originally Posted by floridawest View Post
What I did not know is that USDA allows absolutely no value for a pool when it comes to appraisals. Or at least that is what I was told by a mortgage broker. Can you confirm my statement about the understanding of types of loans and especially the appraisal not including a pool? Urgent!
Let me answer your question as best I can.

The USDA guidance on pools is found in USDA Rural Development Administrative Notice 4701 (also called RD AN No. 4701).

Here's the quote: "The purpose of this Administrative Notice (AN) is to clarify that in-ground swimming pools are permitted under the Single Family Housing Guaranteed Loan Program (SFHGLP) as long as loan funds are not used to finance the contributory value of the swimming pool."

As applied to an appraisal and ONLY as an example, if the home & land are valued at $200,000 and the appraiser can determine that the market-derived value of the currently installed in-ground pool is $10,000, the loan value cannot exceed $190,000.

Here's the catch --- the most recent edition of RA AN 4701 expired 31 December 2013 and, according to the USDA website, it hasn't been replaced with a new edition. So, at this point, there is no CURRENT guidance pertaining to in-ground pools.

Hope this helps!
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Old 02-19-2014, 02:19 PM
 
Location: USA
270 posts, read 358,841 times
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Default A bit more on USDA loans

For what it's worth, I've been studying the heck out of USDA loan "gotchas" since we're trying to buy a house right now using one -- and I like to be aware of all the potential problems up front.

A few little things I've learned along the way that some of the lenders and realtors don't seem to be aware of:

- Because of the rule that a USDA loan can't be used on a potentially incoming producing property, you can run into some unexpected problems. For example, if the house you're interested in has a multi car garage? Wouldn't normally be a problem, *but* if you happen to work a a mechanic? Now they'll probably deny it, saying you could theoretically use the large garage to repair vehicles for people as a side job. Items on the land such as an old chicken coop or barn could cause similar issues. Doesn't matter if you have no plans to raise livestock. The key here is *potential*.

- Because the USDA loan isn't intended for use on "fixer upper" homes, but rather, only homes in "move in" condition, a lot of repairs may need to be made before the loan can successfully close. Any loose electrical wires hanging out of panels (even if they're not "live" anymore), missing hand-rails on stairs, or even peeling interior paint or non-functioning lights in rooms could get flagged. IMO, you really should have caught most of this stuff anyway when you (hopefully) paid for a home inspection during the buying process... but it's all stuff you need to negotiate with the seller to repair for you, to make the deal go through. (I understand that alternately, some small repairs can be negotiated with the USDA to be fixed as part of an agreed upon repair budget you put in writing that you'll put aside to fix them after the loan closes.... but generally sounds to me like stuff you want the seller to address ahead of time, to avoid hassle and complications.)

- If you have outstanding credit card debts, at least make sure you've paid them all down so you owe less than 50% of the available balance on each one. They'll tell you the USDA loans only look at your required minimum monthly payments to these cards when factoring in how much debt-load you have vs. your income. But doing this causes your credit score to go up as much as 30-35 points, as soon as the credit agencies realize it's been done. It's going to do nothing but help make the deal go through if your FICO score comes back as high as possible.....
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Old 02-20-2014, 05:22 PM
 
Location: South Texas
478 posts, read 827,225 times
Reputation: 593
Let me address of few of your comments below:

(Note: I am NOT with the USDA/RDA nor am I in the mortgage industry.)

Quote:
Originally Posted by tw71 View Post
For what it's worth, I've been studying the heck out of USDA loan "gotchas" since we're trying to buy a house right now using one -- and I like to be aware of all the potential problems up front.

<snip>

- Because of the rule that a USDA loan can't be used on a potentially incoming producing property, you can run into some unexpected problems. For example, if the house you're interested in has a multi car garage? Wouldn't normally be a problem, *but* if you happen to work a a mechanic? Now they'll probably deny it, saying you could theoretically use the large garage to repair vehicles for people as a side job. Items on the land such as an old chicken coop or barn could cause similar issues. Doesn't matter if you have no plans to raise livestock. The key here is *potential*.

Many USDA-loaned properties have multi-car garages, both attached and detached, many with multiple sheds and other outbuildings, and some with a small herd of cattle/sheep/horses, etc. This is pretty common in my area and is exactly that market USDA/RDA loans are geared toward. Again, the intent of USDA/RDA loans is for residential properties but that means "non-commercial" applications. So, as long as you can certify that the home and site amenities are not to be used for commercial operations, I would believe that that should be sufficient.

BTW, a sure clue that something may be "commercial" is the number and type of equipment that might be stored at the location. If the on-site equipment consists of a light duty tractor with a field mower, a couple of stock trailers, and similar "light duty" equipment, you should be OK. If you have an equipment shed full of heavy equipment, the loan officer is going to take notice.

- Because the USDA loan isn't intended for use on "fixer upper" homes, but rather, only homes in "move in" condition, a lot of repairs may need to be made before the loan can successfully close. Any loose electrical wires hanging out of panels (even if they're not "live" anymore), missing hand-rails on stairs, or even peeling interior paint or non-functioning lights in rooms could get flagged. IMO, you really should have caught most of this stuff anyway when you (hopefully) paid for a home inspection during the buying process... but it's all stuff you need to negotiate with the seller to repair for you, to make the deal go through. (I understand that alternately, some small repairs can be negotiated with the USDA to be fixed as part of an agreed upon repair budget you put in writing that you'll put aside to fix them after the loan closes.... but generally sounds to me like stuff you want the seller to address ahead of time, to avoid hassle and complications.)

USDA/RDA home loans use the FHA inspection standards. These standards focus on the three S's -- safety, soundness, and security. If you want to make your eyes bleed, you can read the reference which is FHA/HUD 4150.2. The bottom line is that all of the major mechanical systems in the home must be functional, any safety issues must be addressed and repaired, there should be no structure or roof issues, etc. It is up to the loan officer to make the final determination about what needs to be repaired and what does not.

IIRC, there is a threshold of $5000 that can be escrowed from the loan amount for these types of repairs. However, if the needed repairs exceed this threshold, the home may not qualify for a USDA/RDA loan as the home would now likely require what is known as a 203K (rehab) loan, a loan which routinely has a higher interest rate than the USDA/RDA loans.

- If you have outstanding credit card debts, at least make sure you've paid them all down so you owe less than 50% of the available balance on each one. They'll tell you the USDA loans only look at your required minimum monthly payments to these cards when factoring in how much debt-load you have vs. your income. But doing this causes your credit score to go up as much as 30-35 points, as soon as the credit agencies realize it's been done. It's going to do nothing but help make the deal go through if your FICO score comes back as high as possible.....

Sorry, I really can't talk to this as I've not researched the qualification requirements but I do know that most federal-backed lending programs got a bit more restrictive with some new policy guidance that went into effective last month.
My responses are in blue above.

Hope this helps!
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