RURAL DEVELOPMENT LOAN UPDATE – $1.5 Billion Left
by Evan Vanderwey on 20/04/10 at 11:01 am
Rural Development – or the USDA to be more exact – is a governmental insuring body that, among other things, insures home mortgages of a certain type. They do this in much the same way the VA (veterans administration) or FHA (federal housing authority) does.
What makes RD popular is that borrowers, subject to credit and income qualification, are able to purchase a home with no down payment and no mortgage insurance. This loan is the least expensive least restrictive loan offered today.
It is likely for that reason that the funding is running out sooner than anyone expected. My post today is for those who are in process or who have a client in process HOPING to still get a loan with these terms.
RD, unlike some home buyer programs, will not allow lenders to reserve funds up front. It’s a first come first serve deal and you need to have your loan file 100% complete before you can ask for funding. You need to write an offer, get your home inspection, do the appraisal, and submit a complete file for underwriting to the bank. Once the loan is fully approved, it is sent on to RD for their approval.
IF AT THAT POINT THERE ARE STILL FUNDS AVAILABLE – THEN THEY ARE CONFIRMED FOR THAT CLIENT.
But, not before, and you can feel the tension:
The buyer spends a lot of money on a home inspection and an appraisal before they know they have a deal from RD.
The seller is accepting an offer and they are not sure if the buyer will get the loan in the end.
Even though we can be sure that a borrower will “qualify for the loan” and be approved, there is no way of knowing for sure if they will get the funding when they have their approval.
But we can estimate . . .
Last Monday I received an email that stated the remaining amount of RD funds to be $1.9 Billion nationwide.
Yesterday the same source says $1.5 Billion is the remaining amount.
That means, at this clip, we have just over three weeks left. But one of two things could be true that changes that number.
1. A higher number of files could be coming in in the next few weeks which could make the last $1.5 Billion go faster than the previous amounts.
2. Fewer borrowers and sellers are willing to take the chance and so very near the end, the last amount could go slower.
It is likely that some of both of these two activities will exist together.
If you are doing a deal today, make sure you are on top of it. We have about 10 more RD loans to reserve and will accept other but only under the following conditions:
1. Everyone knows the risk involved – sellers included.
2. If possible we want have an FHA loan approval waiting in the wings just in case.
The best we can do is the best we can do. This is a great loan and just yesterday, when faced with the above conditions, another one of my borrowers told me to go for it.
Check back next week for another update – until then we will process loans quickly just to be sure.
PS: Many are asking when a new issue of RD funding will be available. RD will never tell on this side of the last issue. Last time they ran out (November 2009) they were up and running again a few days later. There is no telling how long until the next bond issue – we will keep you posted on that as well.
