USDA makes refinancing easier

 Loan Programs, Residential Mortgage  Comments Off on USDA makes refinancing easier
Jun 202016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The USDA announced that effective 6/2, it is making its pilot streamline refinance program permanent. The program allows homeowners who currently have a USDA loan, like a Rural Development loan, to refinance that loan without going through the usual loan process.

As long you’ve been current on your mortgage for the last 12 months, meaning you’ve made the payments within 30 days of the due date, your lender won’t have to order a credit report and won’t have to analyze your income to see if you qualify. It will be assumed that if you’re making your payments on time now, you certainly can continue to make them if we lower the payment.

In addition, you won’t need an appraisal to determine the current value of your home.

Not only will the program save USDA borrowers money, it should make the refinancing process much faster.

USDA to make its loans more affordable

 Loan Programs, Owner-occupied, Residential Mortgage  Comments Off on USDA to make its loans more affordable
May 072016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The USDA recently announced that for fiscal year 2017 (which begins on Oct 1st) it’s dropping the fees it charges for its guaranteed rural housing loans. Currently, USDA charges an upfront guarantee fee of 2.75% of the loan amount and an annual fee, or monthly mortgage insurance (MI), of 0.5%. On Oct 1st, those rates drop to 1% and 0.35%. That really is a huge change.

So, how would that affect a potential homebuyer? Let’s say you’re trying to buy a $180k home. Remember the USDA program doesn’t require a down payment, and most folks roll the upfront guarantee fee into the loan, so we have a roughly $185k mortgage. Using today’s fees, the monthly principal, interest, and MI payment would be about $908.

Okay, what if the fees are at 2017 levels? The monthly payment drops to $869. Over the life of the 30-year loan, that $39/m adds up to more than $14k in savings.

I find the timing of the announcement interesting. Based on our experience, USDA has lost of lot of market share to FHA, which lowered its mortgage insurance rates last year. While I suspect the announcement will shut down use of the program for the summer, maybe it will build some anticipation for it again in the fall.

USDA makes qualifying for a mortgage a little easier

 Loan Guidelines, Owner-occupied, Residential Mortgage  Comments Off on USDA makes qualifying for a mortgage a little easier
Feb 202016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

USDA offers one of the few no-money-down loans, but its credit restrictions have disqualified some first-time homebuyers who don’t have established credit histories. USDA required a loan applicant to have at least 3 credit accounts with a 12 month or longer payment history.

That changed last week. USDA dropped the number of required accounts to 2, which makes it a little easier.

For homebuyers who don’t use traditional credit that appears on a credit report, USDA still allows the use of non-traditional credit accounts to achieve the required 2. Non-traditional credit includes rent, utility, and insurance payments.

However, good payment histories on non-traditional accounts cannot be used to replace accounts that appears on your credit report. In other words, if your credit score is low because of negative items on your credit report, USDA won’t ignore these items just because you have good payment history for rent and utilities.

USDA making housing loan a bit more expensive

 Loan Guidelines, Loan Programs, Residential Mortgage  Comments Off on USDA making housing loan a bit more expensive
Aug 052015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

USDA is raising its guarantee fee for the Rural Development home loan program on Oct 1st. The Rural Development program is one of the few no-money-down loan programs. It’s only available in areas USDA considers rural in nature, but that definition includes a lot of exurbs of major TX cities.

The guarantee fee is up-front mortgage insurance due at loan closing. Most borrowers choose to roll the fee into the loan amount rather than pay it at closing.

The fee is rising from 2% to 2.75% of the initial loan amount. On a $150k home, that will raise the monthly payment by about $5.50 at today’s interest rate.

USDA is not changing its monthly mortgage insurance rate, called the annual fee, which remains 0.5% of the loan balance.

Please note that USDA will apply the change based on the date it commits to the loan, not the date the borrower applies. In order to beat the change, you really need to find a home this month as it generally takes about 30 days from contract signing to USDA loan approval.

Qualifying for a mortgage with student loans

 Loan Guidelines, Residential Mortgage  Comments Off on Qualifying for a mortgage with student loans
Feb 122015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

If you have student loans, qualifying for a mortgage just got easier. Fannie Mae and USDA both have updated loan guidelines to reduce the loan payments that we must count when qualifying you.

For loans in deferment, the new guidelines cut the percentage of the loan balance we must use when calculating your total monthly debt from 2% to 1%. This is a big deal because it reduces the impact of student loan debt by 50%. Further, if the actual payment is less than the 1% calculation, the guidelines state that we can use that lower payment, but only if it fully amortizes the loan.

Unfortunately, if the lower payment is due to an income-based or graduated repayment plan, we have to use the 1% fixed amount. Under these payment plans, the monthly payment may rise, which means the current payment may not provide an accurate estimate of the loan’s impact on your finances.

While USDA already has implemented the new guidelines, the changes won’t apply to conventional loans until 4/1.

Act quickly if using USDA home loan

 Loan Programs, Owner-occupied, Residential Mortgage  Comments Off on Act quickly if using USDA home loan
Nov 122014
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

If you’re using a USDA RD loan to purchase a home this fall, Fri, Nov 21st is a very important date. At the close of business that day, USDA will stop accepting applications for the remainder of Nov. If your loan has not been approved by USDA, you will need to sign new application documents, and the effect could add a week or two to your loan processing time.

USDA has adopted new regulations for its RD program, and it doesn’t want to maintain two processing systems. Thus, it will stop taking applications after next Fri and clear out its queue. This may not be a trivial task given the backlog of applications in some areas. On Dec 1st, USDA will start accepting applications under the new regulations.

If you have a pending application, check with your lender on its status. If your lender needs any documentation from you, act on that request urgently. The new regulations aren’t likely to harm your chances for approval, but if you have an early Dec contract date, the delay in processing could bust your closing.

USDA delays new rural maps

 Loan Programs, Owner-occupied, Residential Mortgage  Comments Off on USDA delays new rural maps
Sep 262014
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The federal government’s fiscal year ends on 9/30, and as is typical in recent years, Washington passed a Continuing Resolution (CR) rather than pass the various spending bills necessary to fund the government. In that CR is a provision that extends the use of the current USDA maps that define property eligibility for its housing programs. So, if a home is eligible today, it will remain eligible until the CR expires. And it’s entirely possible that when Congress finally passes a USDA spending bill, some legislator will slip in a provision to extend the current maps again. That said, if you’re eyeing a property that would have been ineligible on 10/1, I wouldn’t wait. Start the homebuying process now so you can take advantage of the benefits of a USDA mortgage.

USDA mortgage maps changing Oct 1st

 Loan Programs, Owner-occupied, Residential Mortgage  Comments Off on USDA mortgage maps changing Oct 1st
Sep 102014
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The USDA Rural Development loan is a great option for homebuyers in rural locations. It requires no down payment and has lower monthly mortgage insurance than an FHA loan.

The USDA’s definition of rural may surprise you as it includes many of the exurbs of the major TX cities. As of Oct 1st, that definition narrows a little as USDA is releasing new eligibility maps based on recent census data.

The main changes I noticed were the expansion of ineligible areas in Pflugerville, Round Rock, and San Marcos in the Austin area and Denton and McKinney in the DFW area. In addition, the ineligible area on the west side of Ft. Worth expanded significantly. However, you’re still going to find some subdivisions on the outskirts of these cities are eligible. The maps changed little in the San Antonio and Houston metros. I included a link at the end of my blog to the USDA eligibility Web site where you can compare the old and new maps for yourself.

USDA bases property eligibility on the date it receives your loan file. For most lenders, this will be a couple weeks after loan application. So, if you’re buying a home using the old maps, you need to act soon to beat the changes.

USDA mortgage eligibility Web site.

USDA raising monthly mortgage insurance rate

 Loan Programs, Owner-occupied, Residential Mortgage  Comments Off on USDA raising monthly mortgage insurance rate
Sep 042014
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The USDA RD loan is a great option for homebuyers in more rural locations. The loan requires no down payment and has much lower monthly mortgage insurance than an FHA loan.

Unfortunately, the gap between the two will close a little this year. For all loan commitments after 9/30, the USDA is increasing its monthly MI rate from 0.4% to 0.5%.

That still makes it a bargain compared to FHA. While USDA does have a higher up-front fee, 2% vs. 1.75% for FHA, look at the difference in monthly payment between the two. For a $150k FHA loan, the monthly payment including mortgage insurance would be about $863. For a USDA loan, the payment would be about $757, more than $100 less.

If you’re thinking about using a USDA loan, be aware that USDA bases the fee increase on the date it commits to the loan, not the date you apply. You probably should make your loan application no later than next week if you want to beat the deadline.