The Smooth Loan Process #2010-26 (Back from Vacation Edition)

USDA Funds Running Low

Feeling rested and refreshed, I've returned from vacation to news of changes to my second favorite loan program (VA is my favorite).

One of the best loan programs out there for first time buyers is the USDA Guaranteed Rural Housing Program. This program is designed for owner occupied single family properties located in Rural areas.

Congress appoints a certain amount of money every year for the program. For 2010, the available funds are $13.5 Billion. As of March 15, $9.5 Billion has already been used. That means only $4.0 Billion left which USDA anticipates will be depleted by the end of April. The new fiscal year does not begin until October.

What does this mean to you and I?

Unless you already have a property under contract and the loan is in process, it is unlikely that you will be able to utilize the USDA program for your home purchase. USDA will only honor loans that have received a final loan commitment from USDA at the time that the program runs out of funding.

If you are currently looking for a home and had planned on using the USDA for your loan program, be prepared that you may have to switch your loan to FHA. That's not a bad thing however, it does mean that a down payment of 3.5% of the purchase price will be required as compared to the zero down that USDA allows.

Not to worry, the funding will be back in October. It is actually very common for USDA to run out of funding before Congress renews the appropriation. Usually, it happens just a few days before the the new fiscal year so we never notice. This time its six months before hand so we'll have to make adjustments.

The Smooth Loan Process lesson for today: Be prepared to switch your loan to FHA if you are currently looking for a home and planned on using USDA.
Bonus Lesson: Spring break is not the time for a family vacation if you are going somewhere that college kids go for spring break. Call me if you want details on that.

Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com