New USDA maps effective Feb 2nd

The long delayed new USDA maps go into effect on Feb 2. We talked about these news maps in my Sep 8th blog, which you can find in the archives. The main changes are around the Austin and DFW metros and amount the removal of some exurbs from eligibility. Remember that USDA bases eligibility on the date it receives a complete loan file. For most lenders, this will be a couple weeks after loan application. So, homebuyers need to act soon to beat the changes.

USDA also implemented other significant changes to its rural development program at the end of last year. Some of the highlights are:

- USDA increased the program's monthly mortgage insurance rate, called the annual fee, from 0.4% to 0.5% of the loan's balance. Even with the increase, the RD loan program still compares very favorably to FHA. Both should have roughly the same interest rate, but USDA requires no down payment and has lower monthly MI.

- If a homebuyer can document that his current home no longer meets his family's needs, he doesn't have to sell his existing home as long as it isn't financed with a USDA loan. Unfortunately, the homebuyer has to qualify with both house payments as USDA will not allow rental-income credit.

- USDA will allow lenders to escrow at closing for minor repairs. This could increase the number of homes eligible for USDA financing. Check with the lender before you execute a contract as USDA doesn't define "minor repairs" and some lenders may not be set up to handle escrowed funds.

- Finally, the RD program now can be used to purchase homes with pools. However, the appraiser will be instructed not to attribute any value to the pool. Thus, unless the homebuyer has the funds to pay the difference between the appraised value and the contract price, it still may be difficult to use an USDA loan in these situations.