Robert McDonald, Housing Program Director
VT/NH USDA RURAL DEVELOPMENT
GUARANTEED LOAN PROGRAM
We DON’T inspect meat!
(or peanut butter)
We DON’T finance farms!
This is NOT Rural Development!
THIS IS MORE LIKE IT!
NO MAXIMUM PURCHASE PRICE
More lenders choose 100%
Guaranteed financing FIRST!
• True 100% program
• No maximum purchase price
• No monthly mortgage insurance
• Expanded qualifying ratios 29/41 and above
• No asset limit / No reserve minimum
• Generous income limits: ADJUSTMENTS
• Not FICO driven: NOT A SUB-PRIME SOLUTION! Emerging
Markets/Non Traditional histories, etc.
• NOT just for first time homebuyers
• Creative financing options to maximize buying power
If you have a
the zip code
enter it here
click on the
If you are
click on it!
If you had
can see a
• Downpayments accepted up to 19%
• Gift/Grant funds accepted
• Generous income limits
Deductions allowed for children,
daycare, and more!
MOD. INC-GUAR. LOAN
Washington County ―Adjusted‖ Income Limits
1 person: $52,750 5 person: $81,400
2 person: $60,300 6 person: $87,400
3 person: $67,800 7 person: $93,450
4 person: $75,350 8 person: $99,450
Search out DEDUCTIONS!
Dependents: $480 each
• Children 18 yrs. or younger
• Disabled household members 18 yrs. or older
• Full time students 18 yrs. or older
• Care expenses of minor children 12 yrs. or younger
that enable the employment of a household member
Elderly family: $400
• 62 yrs. of age or older, disabled, or surviving spouse
of deceased elderly client
• Medical expenses not to exceed 3% of gross income
Deductions In Action!
• Family of 3 $73,000 Gross
salary - $480 1 child
• Moving to - $5200 daycare
adjusted income THEY
limit for 3: $67,800 QUALIFY!
KIDS ARE EXPENSIVE!
• Daycare: $100 - $300 per week
• After school care: $75 - $150 per
• Summer months: full time care for
No tax returns necessary! Please provide receipts or
letters from providers stating prices.
FIND THE DEDUCTIONS!
Qualify more clients!
Family of 4 moving to Washington Co.:
• 3 yr old: daycare $200 wk x 52= $10,400
• 9 yr old: after school $50 wk x 9 mo. = $1,800
• 2 kids x $480 = $960
possible gross salary
Guaranteed to compete!
$4,000 annual real estate taxes
$600 annual home insurance
YOU BE THE JUDGE!
NO PMI LOANS 8% INTEREST RATE 30 YR. TERM $1572
FREDDIE MAC 100 $1547
FREDDIE MAC HOME POSSIBLE/FANNIE MAE MY COMMUNITY $1518
FLEX 100 $1505
5% CONVENTIONAL ($8,750 + MI) $1493
FHA ($5,250 + UFMIP + MI) $1488
40 YEAR LOAN + MI $1486
FLEX 97 ($5,250 (3%) DOWN + MI $1471
80/20 80%: 6% 30 YEAR LOAN 20%: 7.5% 30 YEAR LOAN $1467
VA 2.15% FEE NO MI $1455
100% RURAL DEVELOPMENT + $1453
2% GUARANTEE FEE NO MI
2% GUARANTEE FEE IS A DEAL!
• Roll fee in above
appraised value: No
out of pocket needed
• Cheaper than PMI
• Best insurance
coverage for the lender
• Least cost to client
Guarantee Fee vs. PMI
$3,500 guarantee fee
Freddie 100: 2.08 years
HP/My C: 3.39 years
95% LTV: 3.5 years
Flex 100: 4.0 years
FHA: 1.02 years
(time to break even)
Average stay of
homebuyer: 5-7 years
WHO APPROVES THE LOAN?
Rural Development does not:
• Underwrite loans
• Issue credit waivers
• Inspect properties
• What are your credit standards?
– Explanations acceptable to your standards
are given special consideration
• You decide if open collections must be
– Will repayment be impaired?
• Credit scores over 620 require no
AN 4237: Utilizing Credit Scores
• 620 and above qualifies for
(NO VOR’s, No adverse credit explanations)
• 619 and below: be careful of too many
(ratios waivers, and adverse credit waivers, and no
previous housing history, and etc.)
AN 4216: Collection Accounts
• UW will determine what is to be paid
• Tax liens, judgments, federal debts must
• Adverse credit waiver must be issued
on 1008 by UW if collections remain
• UW must document decision
THE UNDERWRITER WILL
By signing here you are
acknowledging that you
did underwrite the file.
The borrower(s) will each
FAX OR PHOTOCOPIES
OF SIGNATURES ARE
RD 101: File Flow
• Lender interviews applicant
• Lender submits to their
• Lender submits approved
underwritten file to RD
• RD issues conditional
commitment in 24-48 hours
• Loan closes
• Lender submits closing
package to RD
• RD issues Loan Note
Building your business
Be a trusted advisor
• $230,000 purchase
• 10% downpayment saved
Car 1: $350/mo.9 months left
Car 2: $400/mo. 2 years left
Old Navy: $500
$12,650 credit card debt alone!
Which would you choose?
100% Guaranteed 10% Down Conventional
$230,000 + Guarantee fee, $230,000 – 10% ($23,000),
taxes & insurance taxes & insurance
• Clients retain $23,000 to • Clients are out $23,000 and
pay off debt, save, invest, they have over $25,000 in
• By paying off Car 1 and all • Home Equity Loan?
credit cards they would Now they get to PAY to
still have $7,350 plus $350 borrow their own money!
additional monthly income (If they even have a credit
($4,200 per year)
• ALL FOR $39 MORE PER score high enough to
MONTH! qualify for the loan)
5% down with RD
Put down 5% with RD 80/20
$230,000 – 5% ($11,500) + 80%: $184,000 6.5%
Guar.fee, tax, & ins. 20%: $46,000 8.0%
$1,852 Plus taxes and insurance
• Client retains $11,500 for
debt reduction, savings, ER • Need a great credit score
• 2% FEE IS THE MOST COST • 2nd mtg is tied to HELOC and
EFFECTIVE OPTION! prime rate it will go up—may
not be a fixed rate
• Client has to make two
Purchase and repair
• Escrow for repairs & get Note
Guarantee with no delay
• Not just weather related repairs
• Homebuyers get to close and move in
before repairs are completed
• Up to 180 days to submit completion
Myth #1: Inspections are too picky; house
will never pass……
• HUD Handbook
(drastically revised 12/2005)
• Home Inspection
• In a survey of real estate
professionals conducted by the
American Society of Home
Inspectors, 99% of respondents
said they always or often make the
recommendation that buyers get a
• RD will alert you IF any repairs are
necessary to meet minimum standards.
Which repairs are required?
• Missing handrails
• Cracked window
• Dripping faucet
• Peeling paint on doorframe/windows
• Flat roof on garage: could not inspect
• No smoke detectors
• No GFI’s in kitchen/bathrooms
NONE OF THOSE
Myth #2: RD loans have recapture, I don’t
• Guaranteed loans
Clients make full payments
to their lender.
Myth #3: RD loans take too long to close
• THIS IS YOUR LOAN!
How fast can you complete:
• RD turns around
files in 24-48 hours
Myth #4: Real estate in my area is too high
priced for RD loans
Expanded Qualifying Ratios
+ Creative Financing Options
BUYERS QUALIFY FOR A
HOME THEY LOVE!
Myth #5: RD loans are for low income
applicants and ―fixer-upper‖
• RD encourages
newer homes and
100% Guaranteed Rural
Development Financing is:
It’s the BEST!
WE BUILD COMMUNITIES!
One home at a time!
NH: Colleen Ladew
VT: Cheryl Ducharme
802-748-8746 x 107
USDA is an equal opportunity provider, em ployer, and lender. To file a com plaint of discrim ination w rite USDA, Director, Off ice of Civil Rights, 1400 Independence Avenue, S.W., Washington, D.C., 20250-9410 or call (800) 795-3272 (voice) or (202) 720-6382 (TDD).