The U.S. Department of Agriculture offers a variety of programs to help low to moderate-income individuals living in rural designated areas with better access to affordable housing finance options with no down payment and little to no out of pocket costs. These are great programs, and areas you might not have thought eligible for this program are. The proposed new Rural Designated Boundaries for 2014 have been delayed until Sept 2014 and most likely later.
As an example, many areas in the Sumner and Bonneylake, WA are eligible for this program, even though they are in moderately developed Pierce County, WA suburban zones and are not necessarilly what you might consider rural. For your convenience, please click to see eligible areas and addresses under this program.
Loans are limited to applicants with moderate incomes that do not exceed state and local Rural Development(RD) median income limits. Moderate income is defined as the greater of 115% of the U.S. medium family income or 115% of the averageof the state-wide and state non-metro median family incomes or 115/80ths of the area-low income limit. Please click to see income limits. As an example, a household of 1-4 people with a total yearly income of $82,450 or less is income eligible under this program. As you can see, many of you reading this are qualified to participate in this incredible no money down program!
RHS Loans are an attractive option because:
- Closing Costs are minimal
- No Down Payment Retuired
- Smaller monthly mortgage insurance compared to Conventional and FHA Loans by a significant percentage
- Mortgage insurance is a set percentage(.4% of the total loan amount/12) and is not affected by credit scores
RHS loans can be used toward the purchase and renovation of a previously owned home or a new construction. Families must be able to pay their monthly mortgage, homeowner's insurance and property taxes.
Most of our lender partners will require a Minimum mid FICO score of 640 for eligibility and the maximum loan amount is $417,000(conforming loan limit)
- Ratios Allowed: Generally our lender partners have a standard range of 29%/41%. Higher ratios may be allowed per Rural Development requirements and compensating factors. The low end is the housing ratio which is your total house payment compared to your total gross income and the higher ratio is your total debt(housing and all other debt combined) to total gross income ratio.
Guarantee Fee: As a 0 money down program, financed at 100% loan to value. A 2.00% Guarantee Fee is added as a self funded insurance program in the event of loan defaults. This fee may also be financed into the loan amount. As an example, if your purchase price is $200,000, adding your 2% Guarantee fee to the transaction would give you a total loan amount of $204,000.
Refinance: Can be a rate and term only. No cashout allowed. Refinances can only be used when refinancing current Rural Housing Guaranteed Loans. Leveraged loans may not be refinanced under the Guaranteed Rural Housing Program. The maximum loan amount cannot exceed the balance of the existing rural Development loan being refinanced plus: 1) Accrued interest 2)Financed guarantee fee 3)Reasonable and customary closing costs 4) Funds to establish a new tax and insurance escrow account