HomebuyerHomebuyer WorkshopWorkshop

Introduction

• Homeownership and Rural Development

• Where to get started and how Rural Development can help

• Homeownership guidelines and Rural Development Financing Options

Agenda

• Homeownership

-Are you ready?

-Myths about Homeownership

• 100% Financing Options thru Rural Development

Overview

• Be prepared• Get ready before you apply• Explore All Options• If it sounds too good to be true, it probably is.

IncomeLocationCredit

Homeownership- Are you Ready?

• You should have a continuing and reliable source of income prior to applying

• You should have a good credit history that shows you’re ready for homeownership

• Your total debt should be manageable and you should be able to afford to take on the costs associated with homeownership

Myths About Homeownership• Myth: You need great credit to become a homeowner Fact: Your credit history should indicate a reasonable ability to meet obligations as they become due

• The following are forms of acceptable credit: 1) No Credit 2) Bankruptcy discharged more than 36 months prior to application 3) A satisfied judgment or foreclosure (with no loss of security) which was completed 12 months prior to application

• Myth: You need to put 20% down to afford a home.Fact: Rural Development finances 100%

• Myth: You can’t buy a home in the U.S. if you’re not a citizen.

Fact: If you are a legal resident, you can buy a home in the U.S.

• Myth: If you’re late on your payments, you’ll lose your house.• Fact: Rural Development Direct Loans offer a moratorium up to 2yrs

How Rural Development Can Help

• 3 Ways Rural Development Can Help:

1) Direct Loan

2) Leverage Loan

3) Guaranteed Loan

502 Direct Loan

Purpose:• To provide home ownership opportunities

to families with very low and low incomes (see adjusted income limits)

• Loans may be used to buy, build, improve, or repair homes

Eligibility

• Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance

• Applicants must be unable to obtain credit elsewhere, yet have reasonable credit histories

• There is no required down payment

Terms• Loans are for up to 33 years (38 for very low income

or low income applicants below 60% MHI and who cannot afford 33 year terms).

• Interest rate is set by Rural Development, currently the interest rate is 4.65%

• Interest rate may be modified by payment assistance subsidy to as low as 1%

Terms

• Loan is with Rural Development• No application fee• No down payment• No mortgage insurance• No limit on “seller paid expenses” or gifts• Closing costs can be financed for very low income

borrowers• Repairs may be financed• Rate may be subsidized to as low as 1%

Subsidy• ‘Subsidy’ is the amount of your payment that the Government

pays each month.

• The subsidy is paid back at the time of sale or transfer of ownership.

• When refinancing, subsidy can be included in the payoff or allowed to remain on the land records.

• Amount of subsidy to be repaid is based on a current appraisal at the time, less closing costs and eligible improvements.

• Subsidy repaid may be either the full amount received over the life of the loan or up to the appraised value.

Site & Building Requirements• The property must be a

single family dwelling or an approved condominium unit

• Must be located in an eligible area. See map.

• Must be located on a public road or recorded maintenance agreement for a private road.

• Property cannot have an in-ground pool.

• Cannot be located in a flood plain unless flood insurance is obtained.

• Property cannot be sub- dividable.

• The dwelling must be decent, safe and sanitary or repairs

financed with loan funds.

• Property must meet RHS thermal standards.

Section 502 Leveraged Loan• Can be originated by an approved lender of your choice or

Rural Development.

• Borrower makes two separate payments, one to Rural Development and one to the Lender.

• Allows the borrower to receive less subsidy. Therefore less owed back.

• Allows the borrow to get the lower (CHFA) rate.

• The Rural Development portion may be subsidized as low as 1%.

502 Guaranteed Loan

Purpose:

• To help moderate income families purchase homes in rural areas.

• Funds can be used to build or purchase a home.

Eligibility

• See income guidelines attached or visit the eligibility website:

http://eligibility.usda.gov/eligibility

• The approved lender of your choice (see list) determines repayment feasibility, using repayment ratios.

Eligibility

• Applicants must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must be unable to obtain credit elsewhere, yet have a reasonable credit history.

Terms

• 103.5% LTV• No Mortgage Insurance• 30 year fixed rate• No loan limit• No limit on “seller paid expenses” or gifts• Fees and Repairs may be financed• No down-payment or reserves required.• One time Guarantee fee of 3.5% may be financed over

the appraised value.

Guaranteed to compete!

$175,000 loan 7% interest rate • Real estate taxes and homeowners insurance

are NOT included in these payments.

• YOU BE THE JUDGE!

t

RD 502 Direct loan at 1% $519.02

Helpful Websites

Income and Eligible Area

http://eligibility.sc.egov.usda.gov/eligibility

Free Annual Credit Report

www.annualcreditreport.com

Questions?

• Rita E. Bellinger, Area Loan Specialist238 West Town StreetNorwich, CT 06360

 • Phone: 860-859-5218 x207• Fax: 860-859-5223• Email: Rita.Bellinger@CT.usda.gov