USDA Home Loan Underwriting Updates

big backyardUSDA is quickly becoming one of the Country’s most popular mortgage loan programs, and with that, the USDA Rural Development Offices are getting backlogged!  In the past 2 months, NC went to a “Centralized” Underwriting Process for these loans… and we are sometimes seeing 2 week turn times with USDA Underwriting, and sometime a little longer.  Because of this, we recommend writing a closing date 45 days out (as opposed to the “typical” 30 day contract).

USDA Home Loans are 100% (plus) mortgages. There’s ZERO Downpayment required, and there’s a small monthly PMI charge.  It’s fairly easy to qualify for, and all 100 counties in NC have some area that qualifies for the program!

Because of this increase in volume, there have been several recent AN (Adminsitrative Announcements) from them regarding documentation types, and clarification of guidelines.

  • Gift funds are allowed with USDA Home Loans, however gift funds are not considered as cash reserves, or as a compensating factor.
  • Gift Funds may be used for closings costs, voluntary downpayment, and to cover the guarantee fees, however (again) they will not be considered as cash reserves for a compensating factor waiver.
  • USDA only allows us to count 60% of the Vested Amount in an IRA, Keogh or 401K account (normally we count 70-75%) for reserves – we do need the MOST recent statement on the account.
  • CASH ON HAND can be considered, however the Lender must know how the cash was accumulated, and over what period of time.  Our experience is that CASH ON HAND is very difficult to use in a mortgage transaction… but for the right borrower, we do have this option.

IN GROUND SWIMMING POOLS ARE PERMITTED WITH THE USDA Single Family Housing Guaranteed Loan Program… “as long as loan funds are not used to finance the contributory value of the swimming pool. “

The Announcement about swimming pools further clarifies that, “Typically, a swimming pool has value and adjustments are made for comparable salesthat do not have swimming pools. It is possible that a swimming pool does not have a contributory value. The appraiser should address such in their appraisal report.

An appraiser must not indicate that a swimming pool has no value simply because “this is a Rural Development guaranteed loan.” Under USPAP, the appraiser should address the swimming pool under local market conditions. For example, if the swimming pool has a torn lining, and is not usable, the appraiser may conclude that it has no contributory value.”

For More Information on recent Appraisal Changes and USDA Mortgages, click here!

If you have questions about USDA home loans, please call Steve and Eleanor Thorne, USDA Home Loan Experts, 919-649-5058  Connect with us on Facebook!

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