Confessions of a Contract Processor: USDA is the WAY I SAY for ZERO DOWN PAY!!
As the owner of a contract processing company, one of my responsibilities is to not only make sure my processors pipelines are full, but to also keep my eyes and ears open for trends in the marketplace to help our broker customers get more loans.
The buzz that keeps popping up in conversation over the last couple of weeks has been the opportunities with USDA. Not that it hasn’t always been around-it’s just that now it is one of the only non-downpayment programs left!
You may be well aware of its benefits, but to bullet point the key points for your reference, here are the highlights:
– NO DOWN PAYMENT! No Cash Contribution from Borrower
– Loan up to 102% of appraisal Value
– No MI
– 30 year fixed rate loan-conforming rates!
– NO RESERVES REQUIRED!
– NOT Limited to First time Homebuyers!
– NO limit on CLTV
– No minimum credit score!
More lenders are getting on board as te need for a wider scope of options becomes necessary to help consumers.
Check it out for yourself! USDA website is easy to navigate and to the point: http://www.rurdev.usda.gov/fl/guarrhs.htm
TIPS FROM OUR PROCESSOR:
Here are some valuable tips from a processor on our staff who has been working USDA loans:
1. Income and property eligibility needs to be checked for each file to make sure it doesn’t exceed the guidelines (Income eligibility is for total household members over the age of 18….be careful on that one!)
2. 2% guarantee fee can be financed in
3. RD forms need to be complete….specifically RD 1980-21. The RD forms are found on the lender’s website. The broker needs to have the borrower sign the 1980-21 but the lender fills out the rest.
4. Loans have to be underwritten through GUS(USDA version of DO) or whatever the lender uses (the lenders I deal with do this for us)
5. Need to determine if closing costs and prepaids will be financed in
6. Make sure to inform appraiser that it is a USDA loan
7. I have used Primary and Guaranty Trust for lenders
8. Loans are about the same level as an FHA.
After the lender issues approval then the loan has to go to RD for approval…..plan accordingly! It depends on how busy RD is as to how long they give approval.
There it is a nutshell! Hopefully this can help add to your stable of options to help your customers, marketing efforts and pipeline replenishment!