Livin' That Country Dream..... Sooner Than You Think!

Welcome to this week's post at the Ft. Wayne Mortgage Minder Blog!

Ever dreamed of living in the country?  Think you could never afford it?  What if I told you there is a 100% financing loan product out there for families with low- to moderate-income so long as the house is located in a rural area?  You'd think there's a catch.  Well, guess what?  There is no catch and it happens to be one of our most popular loan products.  This week's post at the Ft. Wayne Mortgage Minder discusses the two types of USDA loans established specifically for low- to moderate-income households realize the dream of living in the country.  And no, you don't have to become a farmer!

A quick history and we'll move on.  Loans from the USDA to borrowers are nothing new, believe it or not.  The first time the USDA extended credit to families happened right after the Great Depression.  Poor families could borrow money so they could move into rural areas and farm the land.  The USDA also gave emergency loans to existing farmers who had lost everything in order to replace much-needed farm equipment.  These days the USDA continues to help families who want to move into the country, but the requirements to become a farmer or to buy tractors and combines have since been dropped!

MLOs (that's me, a licensed Mortgage Loan Originator!) work with two residential programs under the Rural Housing Administration: the USDA Guaranteed Loan and the USDA Direct Loan.  If you read no further than this, here is your take-home message:  the GUARANTEED loan is the one you want, NOT the Direct Loan (in most cases).  We do not even offer the USDA Direct Loan program at Legacy Lending (my company).  Here's the difference:

USDA Direct Loan

In the USDA Direct Loans, you make your monthly checks out to the USDA, not to a traditional lender.  Both the interest rate and the monthly payments are subsidized by the government.  This means that you don't even make the entire payment for the loan; the government helps you out each month.  This sounds great, but here's the kicker (and why we don't even do these loans at Legacy):  when you sell or refinance the home, all of that subsidy money must be paid back to the government.  Every single red cent.  I'd like to see the government make the banks who received all of that TARP money pay it back, but instead, the feds prefer to make sure We the People pay them back.  Isn't that lovely?  And now for the cream-of-the-crop (pun intended) loan program between the two:

USDA Guaranteed Loan

In a USDA Guaranteed Loan, you make your check out to a traditional lender, not to the USDA office.  No portion of this loan is subsidized.  The rate you get is the rate you earn, just like a conventional or FHA loan.  It is unsubsidized and your monthly payment is yours entirely.  In this loan product, the USDA acts as a mortgage loan insurer: you don't have PMI (private mortgage insurance), instead, your loan has been guaranteed to your lender by the USDA.  A small portion of your mortgage bill goes to the USDA for that guarantee, similar to FHA mortgage insurance.  When you refinance or sell, you don't owe anything to the USDA Guaranteed Loan as you would with the USDA Direct Loan.

The USDA Guaranteed Loan product is indeed a great option and we do a ton of these at Legacy.  Here are some basics on the program, take a look and see if you think you would be a good fit for this:

• Let's face it, times have been tough.  I don't have that much money in the bank.  That's fine!  In fact if you have too much money sitting around, you won't qualify.  This loan was designed for people like you.  The entire purchase price is financed, including the 2% funding fee that the USDA charges.  So, essentially, it is a 102% financing program.
• Here comes the catch - finance everything and the rate is going to be sky-high, right?  Wrong!!!  The exact opposite is true actually.  USDA rates tend to be better than the rate you would get under a conventional loan product!
• How do I know if I qualify?  First, you need to make sure the property you're looking at is within the allowed region.  Click here for the USDA address input site.  You'll know immediately.  Don't have a specific address?  That's okay - you can search zip codes, counties, etc. so you know where to begin looking for your dream home.
• I have a home in mind.  Now what? Get ahold of me!  If you want a buyer to take you seriously, reach out and let's get you pre-approved!  It only takes about 15 minutes and I let you know immediately if you qualify.  If you do, I will email your pre-approval letter to you right away and send one to the listing agent at the same time (if you would like).

Thanks for taking a minute to read!  If you have general questions, post them below or click here to email me directly!  Please do not post any personal information such as social security numbers or phone numbers below in the comments section.  They are visible to everyone.  I will only take that information over the phone or in person.  On that note - emails reach me immediately, 24/7, if you have questions or to pre-approve you right away!

This has been Kari Peters with Ft. Wayne Mortgage Minder reminding you that knowledge is power, but knowledge of credit makes you downright dangerous!  Thanks again and see you next week!