North Liberty is one of the fastest growing towns in Iowa and yet at the moment home buyers can still qualify for a USDA Rural Development Loan when they buy a home there.
This is something I like to tell people every opportunity I get. Right now with banks looking so hard at credit conventional loans are tougher to get and the USDA Rural Development Loan has become even more lucrative than ever. Where else will you get 100% financing on a home loan AND a low interest rate AND no PMI (Private Mortgage Insurance?)
Below are some FAQ's put together by a very knowledgeable loan officer in the area, Jessica Greving, VP at Residential Mortgage Network in Coralville. She definitely knows her way around specialty loan programs like the USDA Rural Development Loans, FHA and VA Loans.
What are the basic eligibility requirements for a USDA Rural Development Loan?
Homes financed through the USDA Rural Development Loan must be in a rural area. That would include North Liberty, Solon, Tiffin, Oxford, Williamsburg, Amana and other communities with less than 20,000 residents. The buyer should make less than the RD income guideline (example: 1-4 person family in Johnson County should make less than $87,400 and a 5 or more person family should make less than $115,350. If a buyer pays childcare they can reduce their income by the childcare amount. Visit USDA Rural Development Website for a detailed itemization of income qualification.
How long will it take to process and close a RD loan with RMN, Inc.?
Since RMN, Inc. has the authority to approve the RD loans and is familiar with the process, it is just as quick as any other financing. If you do request something faster than the average approval time, please contact Jessica directly to determine appraisal time frame.
What is the difference between a Guaranteed loan and a Direct loan?
The Guaranteed loan is offered through a participating lender like Residential Mortgage Network, Inc. There are no prepayment penalties, no recapture tax and income is not checked periodically after closing.
A Direct loan is offered directly through the local USDA office (most counties in this area are served by the USDA office in Tipton) and is designed to help very low income borrowers. Borrowers receive a subsidized interest rate and their income is checked every 2 years.
Do I need a pest inspection?
Yes, a pest inspection is required on all RD transactions unless it is a 2nd floor or higher condominium purchase. It can be paid by buyer or seller.
What issues are there with appraisals?
The appraiser is required to note the following: Chipped/peeling paint on the exterior of the home if built prior to 1978, less than 2 years remaining life on the roof, positive draining around the exterior foundation of the home (especially if the basement appears moist), waste pipe relief valve on the water heater to be extended to within 8" of the floor. These are the most common occurrences.
Is the interest rate higher?
No, RMN does not charge a higher interest rate. Though rates from one program to the next can vary a bit from day to day, the RD rate is generally in line with the FHA, VA and conventional rates. Additionally, there is not a charge for credit scores down to 620.
Are there higher fees?
The standard closing costs are approximately $1200. USDA charges a 2% fee that is added to the buyer's loan. A buyer purchasing a home for $100,000 will borrow $102,040. The program does not charge monthly PMI.
Are condominiums eligible for the RD loan program?
Yes! There is still 30-year fixed condominium financing available! If you have already identified the property you'd like to buy, your agent should contact your lender for an approved condominium list.
Getting pre-approved is the first order of business when you buy a home and talking to a few different lenders about the different options is a good idea. Make sure you get a good faith estimate (GFE) while you're there too. You want to know exactly how much the loan will cost you before making a decision. Choosing a home loan is one of those times when the devil is in the details...
Need some help navigating your way through the home buying process? Give me a call or drop me an email. I'm here to help!
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That is actually a very cool loan program I was completely unaware of. I love we get to learn something new every day.
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often. Alena http://grantfoundation.net
Alena ~ Thank you so much for taking the time to leave a comment. I'm glad you are enjoying my blog, I feel priveleged to have you as a reader.
Happy Holidays and all the very best for 2010.
Denise
Greg ~ Glad I could be the one you learned from this time round! The USDA loan program is a great program if you live in a rural area and can take advantage of it. The important thing is for buyers to make sure they work with someone who understands the nuances of the program, since of course it's not quite as straightforward as a conventional loan.
Thanks for stopping by.
Happy Holidays!
Denise