USDA 100% RURAL HOME LOANS GUARANTEED AND DIRECT LOANS PROGRAM
PART I

The Rural Housing Service (RHS) is a part of Rural Development (RD) in the U.S. Department of Agriculture (USDA). RHS operates a range of programs that were once administered by the Farmers Home Administration to support affordable housing and community development in rural areas. RHS provides direct loans (made and serviced by USDA staff) and guarantees loans for mortgages extended and serviced by others.

USDA 100% RURAL HOME LOANS IS BOOMING THROUGHOUT SOUTH CAROLINA
A USDA Government guaranteed and insured loan is a loan that offers purchase or fixer upper borrowers a 100% financing in the rural areas of the country. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities. Some urban areas also qualify for these loans. More than 75% of South Carolina qualifies for USDA mortgage loans.

With a USDA loan program, an individual or family may borrow up to 100% of the appraised value of the home.
NOTE: Many USDA loans are available with:

• No Money Down.
• No Mortgage Insurance
• Affordable by Low Income Borrowers
• Come with Low Monthly Mortgage Payments.
• Borrower only Needs 620 Credit Score

Important Characteristics of USDA Guaranteed Rural Housing Loans (Section 502) (U.S. Dept. of Agriculture) Mortgages

PURPOSE
The USDA (Section 502) loans are primarily used to help individuals or households with steady, low or modest income, but are unable to obtain adequate housing through conventional financing to purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase a new or existing dwelling or the purchase of a new manufactured home and prepare sites, including providing water and sewage facilities. RHS does not make a loan directly to an eligible applicant, but reduce the risk by guaranteeing a loan made by a commercial lender

ELIGIBILITY
Applicants for direct mortgage loans from Rural Development Housing & Community Facilities Programs (HCFP) must have very low or low incomes. Very low-income is defined as below 50 percent of the area median income (AMI); low income is between 50 and 80 percent of AMI; moderate income is 80 to 100 percent of AMI. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance, which are typically within 22 to 26 percent of an applicant’s income. However, payment subsidy is available to applicants to enhance repayment ability. Applicants must be unable to obtain credit elsewhere, yet have reasonable credit histories.

ELIGIBLE ACTIVITIES
An eligible applicant must have an adequate and dependable income (up to 115 percent of adjusted area median income, [AMI]) a decent credit history and be unable to qualify for conventional mortgage credit. To qualify the applicant, RHS uses two formulas to decide a family’s ability to undertake the responsibility of a mortgage loan.

• First, the burden of principal, interest, taxes, and insurance (PITI) must be 29 percent or less of the applicant gross monthly income.
• Second, the total of monthly debts must be 41 percent or less of gross monthly income.

LOANS REQUIREMENTS

1. Loans must be from lending institutions that have been approved by RHS.
2. Be a 30-year terms and fixed rates at present market interest rates.
3. Loans may be for up to 100% of the market value or the purchase price, whichever is less.
4. The maximum loan amount is based on the homeowner or household (adjusted) income.
5. Loans may include closing costs, legal fees, title services, escrow account setup fees, prepaid items fees, etc. as long as the appraised value is higher than the sales price.
6. RHS charges the lender a one-time guarantee fee of 2 percent of the loan amount which the lender may decide to pass on to the borrower.
7. No private mortgage insurance is required and Fannie Mae and Ginnie Mae accept the loan on the secondary market.
8. RHS guarantees the first 35% of the loan at 100% and the remaining 65% at 85 percent of loss respectively. The maximum loss payable by RHS cannot exceed 90% percent of the original loan amount.

TERMS
Loans are for 30 years. The promissory note interest rate is set by the lender. There are no required down payments. The lender must also decide repayment feasibility, using ratios of repayment (gross) income to PITI and to total family debt.

Loans are for up to 33 years (38 for those with incomes below 60 percent of AMI and who cannot afford 33-year terms). The term is 30 years for manufactured homes. The promissory note interest rate is set by HCFP based on the Government cost of money at time of approval. However, that interest rate is modified by payment assistance subsidy.

STANDARDS:
Under Section 502 program, housing must be modest in size, design, and cost. Modest housing is property that is considered modest for the area, does not have market value in excess of the applicable area loan limit, and does not have certain prohibited features. There are no restrictions on size or design. Typical amenities, except in-ground swimming pools, are allowed.

The house (residence) constructed, purchased, or rehabilitated to be purchased with the guaranteed loan must conform to the voluntary national model building code adopted by the state and HCFP thermal and site standards CABO Model Energy Code and to the structure, facility, and termite standards established by the U.S. Department of Housing and Urban Development.

Manufactured homes must be new and permanently installed and meet the HUD Manufactured Housing Construction and Safety Standards and HCFP thermal and site standards.

 APPROVAL

Interested, please contact a mortgage client advisor at Tricont Mortgage (803) 317-2500. You can also visit our low rates warehouse page @ www.tricontmortgage.com or email us @ aomoregbee@tricontmortgage.com to complete an application.

NOTE: Approximately 30% of Guaranteed 502 loans are made to families with incomes below 80 percent of AMI. A decision on your application should come within 30 days of the Rural Development office’s receipt of the application. Rest assured! Your new home may be right in front of you.

For more information on different mortgage loan types, purchases, refinance, blog posts, please visit us @ Tricont Mortgage www.tricontmortgage.com, Tricont Buzz www.tricontbuzz.com, Tricont Post www.tricont.posterous.com  Tricont Blog www.tricontblog.com and Tricont Mortgage Blog www.tricontmortgage.blogspot.com before closing on your purchase or refinance mortgage loan.

Good luck on your investment and enjoy your house…..I can be reached @ (803) 317-2500 or email me @ aomoregbee@tricontmortgage.com……..Thank you very much and Welcome.

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