Archive for the “USDA Zero Down Loans” Category

All Things Zero Down for the USDA (Rural Housing) home loan program guaranteed by the Fed Gov’t.

Today I had to confirm with my USDA Underwriter that a Veteran based out in Kansas could purchase an *OWNER OCCUPIED* home here in California using the USDA Zero Down loan. And as I indicated, the answer was yes. USDA doesn’t disallow Veterans stationed in other States from purchasing where their family is.
Of course I had to furnish my Underwriter with adequate documents as to the Veteran homebuyer’s home town/residency etc.

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It appears USDA has tightened up their requirements for “GUS”. (GUS stands for Govt Underwriting System and is the automated engine for USDA just like DU/LP is for FHA etc . . )

FICO scores below 640 will receive a “REFER” and will need to be manually underwritten by the Agency. Borrowers must have three major compensating factors and proof that the derogatory credit that is driving their fico below 640 was temporary and beyond the borrower’s control. Divorce is not a qualified reason. Medical, death of wage earner or immediate family member, loss of job or reduction in wages can be. All must have documentation to support.

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The USDA recently authorized the issuance of Conditional Commitments for GRH Refinance transactions. The Guarantee Fee will be 1% until further notice. Funding for refinance transactions will be available next week, until then Conditional Commitments will be issued “subject to”.
Below you will find some notes regarding USDA refinance transactions.
· Limited to refinancing existing Rural Development loans only.

· Fixed interest rate below the current rate. Must offer monthly payment savings.

· A 1% Guarantee Fee. This can be financed in the Loan Amount for 101.% LTV.

· A new appraisal is NOT required when refinancing only the unpaid principal on an existing GRH loan with the 1% guarantee fee. However, a new appraisal is required when refinancing interest and closing costs (including pre-paid expenses), are included in the new GRH loan.

· No property inspections required!

· Adjusted income limits and repayment ratios are the same as for an initial GRH loan.

· No cash back (except for fees and costs paid out of pocket by the borrower, such as credit check and/or appraisal). The applicants may receive any escrow refund from the old loan.

· Property must be owner occupied.

· No cash back. The applicants may receive any escrow refund from the old loan.

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So I often get asked, “why should I purchase a home using the USDA Zero Down loan when I have money for downpayment and can even put 20% down ?”
Truth is, your money is better ‘grown’ in other investments than remaining dormant as equity in your home. You see, historically house prices rise anyway, regardless of whether you create equity at the beginning or not.
So why not take your hard earned money and put it to better use? Like growing it for your kids’ college education or helping your parents through their retirement years?

FHA vs USDA? In terms of Payment comparison, Remember, FHA has lower Upfront Mortgage Insurance (1%) than USDA’s upfront Guarantee Fee (3.5%). But FHA has monthly mortgage insurance where USDA Zero down does not. Be sure to check out our Super Mortgage Calculator which compares these loans with just a few clicks.

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Just fired off an email to an Investor inquiring whether USDA had a problem with him having bought the property 3 1/2 weeks ago and reselling it for profit.
Of course, answer is **NO**** !! USDA Zero Down (Rural Housing) loans do not have a “Anti Flipping” rule like FHA had.
Even FHA has waived/modified it’s Anti-Flipping policy so it’s less burdensome for investors and homebuyers. But with USDA, there are no restrictions whatsoever.

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