What is a USDA Rural Development Loan?
Section 502 loans are primarily used to help low to moderate income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.
In Wake County North Carolina most areas outside city limits are eligible for financing and the 2013 income limits for a household of 4 is $91,850!
Eligibility: Applicants for loans may have an income of up to 115% of the median income for the area. Area income limits for this program are here. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must have reasonable credit histories.
ONLY APPROVED Lenders may originate USDA Rural Development Loans
– for a list of approved Lenders in North Carolina click here;
Terms: Loans are for 30 years. The promissory note interest rate is set by the lender.
There is no required down payment. The lender must also determine repayment feasibility, using ratios of repayment (gross) income to PITI and to total family debt.
Standards: Under the Section 502 program, housing must be modest in size, design, and cost. Houses constructed, purchased, or rehabilitated must meet the voluntary national model building code adopted by the state and HCFP thermal and site standards. New Manufactured housing must be permanently installed and meet the HUD Manufactured Housing Construction and Safety Standards and HCFP thermal and site standards. Existing manufactured housing will not be guaranteed unless it is already financed with an HCFP direct or guaranteed loan or it is Real Estate Owned (REO) formerly secured by an HCFP direct or guaranteed loan.
USDA loans tend to be more complicated than most because they require not one but two underwriting procedures. The first by the lender who assumes most of the risk to determine credit risk and the borrowers likelihood to repay and the second by the local USDA underwriter to determine eligibility and compliance.
Choose your Lender carefully;
Because of the complex nature of this program it is best to only use a lender who is experienced in this program. Simply because someones can or is authorized to write this loan an expert it does not make them!
Think about it like this – I know how to change a flat tire and in fact in my life I have done so but admittedly due to the choices that I have made in my life I haven’t had to change a tire in two decades! Just because I can and have changed a tire do you think I qualify to be on pit row this Sunday at Charlotte Motor Speedway?
Ricardo Cobos is a licensed Mortgage Loan Broker in Raleigh North Carolina helping people achieve financial security through responsible homeownership using great no money down loans programs like the USDA Guaranteed Rural Development Loans.
Call 919-526-0183 to speak with an experienced mortgage professional or submit your USDA Rural Development questions here.
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