USDA category archives

Since the bursting of the housing bubble, we’ve seen the mortgage industry flood to government-backed mortgages as a source for home lending, and it makes sense.

Government backed mortgages were created during the Great Depression to help the housing market.  Lenders didn’t have money to lend, the housing market was in decline and nobody trusted the banks that were holding their deposits.  Sound familiar?

FHA loans were the first government backed mortgage introduced in 1934 as one of the many government solutions to the Great Depression.  It is the only government backed mortgage that is available to the entire marketplace (VA loans are for qualified military veterans while USDA loans have an income limit and are for designated “Rural” areas only).  FHA has seen a 500%+ increase in market share from 2006 to 2010 from 3.77% to 19.73%.  The funding for these programs have become more limited, with FHA announcing problems with funding in late 2009 and USDA mortgage funds reported low funds before the end for the first quarter (funds are now available).

The government knows the importance of these loan programs.  Their very existence of FHA was to help the housing market during the worst economy in our country’s history.

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September 10, 2010

Today’s Mortgage Definition is: No Money Down Mortgage

Main Entry: no mo·ney down mort·gage

Pronunciation: : \ˈnō ·ˈ mə-nē · ˈdaun ˈ· mȯr-gij\

No Money Down Mortgage – A Simple Definition:

A no money down mortgage means that it is possible to get financing for a home where you are not required by the lender to make a down payment.

Essentially, if you qualify for a no money down mortgage you can agree to buy the home and not be required to make a down payment.

You may need to cover the closing costs or other associated fees (unless you get the seller to pay them on your behalf), but are not required to make a down payment.

No Money Down Mortgage – An Expanded Definition:

One of the most common questions I get today is “can I get a mortgage with no money down”? And the answer is…

Maybe.

No money down mortgage options used to be plentiful – there were multiple programs that would allow you to buy a home without robbing your IRA or begging your parents for a gift. But with the credit crunch and tighter guidelines, many programs that used to be available have been eliminated.

Except for two.

The VA loan program and the USDA loan program both have no money down options available for people who can qualify for their programs.

The VA No Money Down Program

When financing a home with a VA loan, you are not required to have a down payment, there is no monthly mortgage insurance and the VA funding fee (required to be paid up front) can be financed into the loan.

In order to qualify for a VA loan, you must have a certificate of eligibility and a DD214.

The maximum loan amount for VA loans is generally speaking currently $417,000 and in some cases higher based on the Veteran’s entitlement amount.

The USDA No Money Down Program

The bad news about the USDA loan program is that it has been so popular in the last couple of years that they have run out of funding for 2010. The good news is that they are on the brink of getting more funding – and many lenders are accepting applications for the USDA loan program because funding is on the way.

Legislation that raises the “guarantee fee” to 3.5% and designed to make the USDA program self sufficient so it won’t run out of funds again is currently headed to President Obama’s desk for signature.

With the USDA loan program, the two main qualification points for the USDA loan program are that the property you are interested in purchasing must be eligible for USDA financing and you can’t make more than 115% of the median income for the county where you live.

No money down mortgage programs.

They are still available… if you meet the loan program criteria.

August 2, 2010

USDA loans have become a popular option to finance a home (when the property qualifies) because with a USDA loan, there is no mortgage insurance and no down payment requirement and home builders love the options that zero down financing offers..

Yes, you read that right – you can still get 100% financing when you finance an eligible property with a USDA loan.

It seems that pretty much every year at about this time, the USDA “runs out of money” and there is at least some uncertainty as to whether or not the program will have funding to continue on through the rest of the year.

According to the best estimates, The USDA Section 502 guaranteed Rural Housing Program will run out of the money that has been allocated to it sometime in April. And it is estimated that they will need about 150 million in funding to fund the volume of loans estimated that people will apply for for the rest of the fiscal 2010 (fiscal 2010 runs out in September).

And if they really run out of money this year, it could be different than past years — there may be no more funding coming.

In past years USDA has appropriated funds from other areas to make up for the shortfall in funding dollars giving lenders the oppurtunity to continue to fund USDA loans.

One warning sign that there may not be any more funding coming is that USDA is removing the “subject to receipt of appropriated funds” from their conditional commitments. Simply put, this means that there will be no guarantee that lenders will be able to insure the the loan and fund it.

According to Mortgage News Daily:

Why are they doing this? The money usually runs out around the end of the government’s fiscal year which is September 30th and USDA basically tells everyone we’ll get you’re funding commitments either this year or next. Since the money is running out so early in the fiscal year USDA is not sure where the money will come from therefore will not put “subject to receipt of appropriated funds” on their conditional commitments. Last year the money ran out in March but the stimulus provided the gap funding to carry the program thru to the end of the year but this year there is no stimulus money.

What does this mean if you are thinking of financing your home with a USDA loan?

It means hurry.

There is no telling whether or not the program will have funding – and you may end up left in the pasture rather than the farmhouse.

March 15, 2010