Ron Yarbrough CMPS®

USDA Guaranteed Program Explained

2008-12-13T16:16:00.002-06:00

In today’s financial climate first time homebuyer’s are really stuck having to come up with a down payment to purchase a home or get a sizable gift from a relative that is loosing money in their own portfolio.
I have had many requests for more information from the Kansas City Area Realtors that need this type of program to get starving potential homeowners into a mortgage. This will help boost sales and provide a home loan that will benefit a person over the long term. No adjustable rate, No PMI.
This post is for consumers/homebuyers, Real Estate Professionals and Mortgage Professionals that may not have a good working knowledge of the features and benefits of the US Department of Agriculture's Guaranteed Rural Housing program. In the last 13 years I have one of a very few lenders closing these Guaranteed USDA home loans in Johnson County, Kansas. I have always known that it is one of the most under-utilized mortgage loan programs in the United States.
For purposes of this Posting Most the information below pertains to the Kansas City Market, and most importantly to the Gardner, KS area. There are links to help you find more information directly from the USDA.
Many Advantages of this home loan are:
1. No down payment required.
2. No Mortgage Insurance.
3. No cash reserves required.
4. No seller contribution limit.
5. No Prepayment Penalty
6. Loan up to 102%* of appraised value allowed...not the lesser of Sale Price or Appraisal
7. Loan amount can include closing costs and prepaids up to appraised value.
8. No stated maximum loan amount; maximum loan based on repayment ability
9. No First Time Homebuyer Requirement
10. New and existing homes OK
11. Fully amortized 30-year fixed rate loan
12. No minimum credit score required...common sense underwriting allowed.
13. No minimum cash contribution required from borrower.
14. No limit on CLTV when soft second financing.
15. No limitation on source of funds for closing costs. No seasoning requirement.
16. 100% gifted closing cost or down payment assistance is permitted.
17. Non-traditional credit may substitute for lack of traditional credit history.
18. No derogatory credit explanations required when credit score is 660 or above.
19. Rent is not verified with FICO of 660 or more.
20. Qualifying ratios of 29%/41%...29% PITI to Income and 41% Total Debt to Income, however standard ratios may be exceeded with documented compensating factors.
21. Conventional type loan packaging with only 1 extra form required.
22. Competitive rates (set by underwriting lenders) As of 12/12/2008 rates for loans above 85,000 are 5.50%
*Appraisal may be exceeded by amount of Guarantee Fee
Determining if property is in a Rural Development designated rural area:
http://eligibility.sc.egov.usda.gov/
Determining if applicant(s) have an acceptable credit history:
1. Credit history must indicate a reasonable willingness to meet obligations when due.
2. Streamlined credit approval when primary applicant has a middle credit score at 620 or above.
3. No minimum credit scores.
4. Lack of credit is not derogatory. Alternative credit verifications are allowed, typically 3 lines.
5. Lenders make the credit decision.
Income eligibility:
Project the cumulative gross income of all adults in the household.
THE GROSS INCOME LIMITS CAN BE MUCH HIGHER THAN THE ADJUSTED INCOME LIMITS SHOWN IN THIS TABLE
If the projected dependable income exceeds the limits, certain adjustments can be made, such as childcare expenses for children age 12 or younger and paid to someone outside the family. You also can deduct one $480 annual deduction for anyone under 18 or a student who is not one of the applicants. Other deductions may be available (see FL/VI Handbook or RD Instruction 1980-D, www.rurdev.usda.gov/regs
Example: Johnson County 4-person family (2 adults, 2 children) has a gross income of $89610. Child care for the two children age 12 or less is $10,000 annually. Is the threshold income at or below the limit? YES. $89,610 less $10,000 child care less $480 for each child = $79,650.
55050 62900 70800 78650 84950 91250 97550 103800
County
1-person
2-person
3-person
4-person
5-person
6-person
7-person
8-person
All Counties within the Kansas City MSA
55050
62900
70800
78650
84950
91250
97550
103800
See the easy to use calculator at: http://eligibility.sc.egov.usda.gov/eligibility Click on "Single Family Housing" under "Income Eligibility"
Applicant(s) repayment ability:
Ratio limits are 29 front (housing, PITI), 41 back (total debt, MOTI). Rural Development generally allows expanded repayment ratios if recommended by the lender's underwriter. 31%/43% automatic for dwelling built after 1/1/2000.
Other eligibility criteria:
1. Do not own a suitable dwelling.
2. Insufficient resources to secure conventional 80% loan without the guarantee.
3. U.S. citizen or permanent resident or qualified alien.
4. Financed dwelling will be primary residence.
Loan-To-Value (LTV) and Loan Limit:
1. 102% LTV for the guaranteed first mortgage loan when including the guarantee fee, 100% LTV without the fee included.
2. Loan amount can exceed appraised value by the amount of the guarantee fee.
3. There is no loan limit

http://www.RonYarbrough.com

Best No Money Program Ever

2008-12-12T12:40:00.000-06:00

I know I have blogged about the opportunity in the past but I cannot believe more potential homeowners have not taken advantage of the Zero Down Mortgage program. I have been closing USDA RECD home loans for over 12 years and they have always been zero money out of pocket, and no PMI.

The bulk of the clients I have helped have been in the Gardner, Edgerton, Springhill, Desoto, and Bonner Springs, Kansas Area. This mortgage does have some income limits but they are very agressive. For a family of 4 with 2 children under 18 the max income is 79,610 a year per household. In addition you can get credit for Child Care paid.

What this means is that a home buyer would qualify for a 1923 a month house payment if they were at the maximum Income. With an interest rate of 5.5% this would purchase a 265,000 home with Zero Down.

Do the math. There is no better program with a low funding fee of 2% financed into the loan, Veterans don’t even have it as good.

http://www.RonYarbrough.com

Interest Rates are falling at record pace

2008-11-26T08:39:00.000-06:00

When having a mortgage planner on your side you can take advantage of these short term opportunities. FirsTrust Mortgage in Kansas City has perfected the mortgage planning process. Yesterday with a half point drop in long term interest rates the company was able to lock over 70 clients with a simple quick review.
Our clients sleep with confidence that their mortgage will always be watched.

True no cost refinancing is when you are able to lower your interest rate and the lender pays all the closing costs associated with the loan. This includes Title, Appraisal, Credit, Junk Fees, and mortgage tax stamps in Kansas. The principal balance does not go up.

Helping the Real Estate Industry

2008-11-19T12:09:00.002-06:00

Let's face it. The old days are gone. You have to move on. Most successful Realtors I have spoke to recently are working with a lot of investors purchasing bargins because that is where the paycheck is. Everyone who has been in Sales for a while knows you have to plan, fill the funnel, sort and close. That is the natural law of sales. The Realtors I am teaming with today want to plan and get ready for the biggest turnaround in history in 2009. Buyer's are a premium, so shouldn't we all be taking the next 4 months to get the buyer's ready?

Forward thinkers and Real Estate Investors are purchasing on a 3 year plan. In three years there will be money to lend and the market will rebound.

Give me your thoughts
Ron Yarbrough CMPS

Rural Development Home Loans

2008-11-18T15:42:00.001-06:00

I cannot tell you how many Realtors I have spoken to in the Kansas City Area that just cannot seem to get a buyer or potential buyer interesting in purchasing a home. The main reason seems to be the money down and the uncertainty of money. I spoke to one Realtor today that said she was sure that you could not get a mortgage without at least 20% down.
Nothing could be further from the truth. I have 1 conventional loan program for 100% but 2 government programs for no money down and flexible credit guidelines. My favorite is the USDA Guaranteed program. This program has ZERO money out of pocket at a great rate ~6.5% with No PMI.
Sure you have to be in an eligible area but First Time Homeowners don't really care if you are less than 10 minutes out of town.
For more information reply to this blog.
http://www.RonYarbrough.com

Down Payment Assistance

2008-11-16T12:25:00.001-06:00

I have been in the mortgage business for 13 years and was not a big fan of the DPA programs during the seller's market and time of exploding home prices. I did fund some purchases and heavily scrutinized the values. I think eliminating the program during the housing downturn was a bad decision. During the seller's market the program basically helped the buyer's only but in the current market it will help homeowner's sell their properties and possibly avoid more foreclosures and distressed properties. If a seller participates in a DPA program today it is truley a seller's concession and not a premium.The default rate on Fha mortgages associated with DPA is not even close to the default rate on the other Alt A and Subprime mortgages due to the underwriting requirements for income stability and payment shock.
Therefor I support the bill to bring back the downpayment assistance program. I would also support bringing in the lender to participate in the funding of the program.
The downside to the Down Payment Assistance program is the excess profit many mortgage brokers put into the transaction. I think that if the program is brought back, only Mortgage Bankers should be allowed to appove these through a direct endorsment by FHA. Mortgage Bankers have more risk in the event of default and would be required to deliver good quality loans to Lenders.
Send a letter to your representatives

New way to purchase homes

2008-11-16T11:05:00.004-06:00

With uncertainty in employment and the fact the economy continues to spiral out of control, lease purchase opportunities seem more appropriate. A buyer can get into a property they can afford and have the opportunity to purchase at a predefined amount.
Buyer's should still do their due diligence when purchasing the property. This gives the buyer the option to purchase and just like a stock option if the market continues to decline they can choose not to exercise their option. The seller of the property will benefit by having someone else make their payments for the next 12,24, or 36 months and avoid a loss today.
Mortgage liquidity is going to return in the next 24 months and home loans should be easier to get with relatively small down payments. Conforming guidelines will allow for a portion of the rent to go towards down payment as well as Fha Loans.

Ron Yarbrough CMPS

Where is the Bailout?

2008-11-14T12:54:00.004-06:00

We hear the term mentioned daily on the news. Consumers are wanting to know where is there bailout? Why are all these companies that didn't take care of their financial future, getting bailed out? What does all this mean?

Well, I am not sure how to answer this but as always those entities that have cash will come out of this uncertain time with the possibility of great wealth. There really isn't any direct bailout for the consumer unless you look at the employment issue. If companies can stay afloat they will be able to pay people to work. If our unemployment increases then the bailout attempts have failed.

What do you think?
Ron Yarbrough

There is plenty of money to lend

2008-11-13T14:08:00.003-06:00

I think the media has scared the heck out of potential homeowners. What first time homeowner wants to purchase a home that is going to look value and owe the government money on the mortgage.
The media should do a better job of showing where and why markets are what they are. The information they report is always a month or so behind, we all know that, the consumer doesn't. There is plenty of money to lend with FHA, VA, RECD, and even conventional loans. You might need a little money.
There is no better time to buy except at the ultimate bottom. No one can predict the absolute bottom so it would be better to purchase when we are close. We are close.

Give me your thoughts on this subject.
Ron Yarbrough CMPS(r)

Create Purchase Opportunities

2008-11-12T08:40:00.002-06:00

What a great time to purchase a property. There are still 100% programs available. FirsTrust Mortgage offers three opportunites. Two government backed loans and one conventional loan product. Restrictions exist on all three but there is one you will fit into. Now is the time to purchase while we are in the biggest buyer's market in decades. Bank owned properties need to be liquidated before the deteriorate this winter. Get approved and get in on a market that will not be seen again in your lifetime.

Still 100% No Down Payment Programs

2008-11-11T11:51:00.002-06:00

Even with today's tight money environment there are still ways to finance a home with Zero Down. Many future homeowners can take advantage of this program in Johnson County, Kansas. There are Government Gauranteed programs with very attractive payment options on 30 year Fixed and Conventional My Community programs insured with Private Mortgage Insurance. Either way someone who has been paying their bills on time and can prove they can afford a home, will be able to purchase a home without money down.
http://www.RonYarbrough.com to get more information.

Official Google Blog: Google Tip of the Day gadget

2007-10-24T17:32:00.000-05:00

Official Google Blog: Google Tip of the Day gadget

Interest Rates for First Time Homebuyers is Very Low

2007-09-12T16:17:00.000-05:00

This is the first blog posting to my website. Testing it out. I am a mortgage planner in the Johnson County Kansas Area and Specialize in First Time Home buyer loans and Fha, VA, RECD.

Let me know what you think of this blog. http://www.RonYarbrough.com