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USDA Loan Rates, Lenders, Guidelines and Information

What are Some Available Mortgage Programs for Teachers?

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Teachers are perhaps some of the most underpaid and undervalued professionals in the US. The typical American educator earns only roughly $30,000 to $50,000 annually. That being said, most teachers find themselves in a difficult place when it comes to deciding to buy a home.

What options are available for them? Are there any existing special programs that specifically cater to the needs of this demographic?

There in fact are. Let’s look at these options.

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The Good Neighbor Next Door Program

The Good Neighbor Next Door Program is a homeownership initiative created by the United States Department of Housing and Urban Development or the HUD to encourage the renewal of revitalization areas in the country by “providing law enforcement officers, firefighters, emergency medical technicians and teachers an opportunity to purchase homes in these communities.”

Eligible participants are given a 50 percent off from the list price of HUD foreclosure homes if the home is located in an area designated by the HUD as a revitalization area.

Per the HUD, revitalization areas are “HUD-designated neighborhoods in need of economic and community development and where there is already a strong commitment by the local governments.”

Find an eligible area here.

Teachers are at the front row of these benefits. But how does the HUD define a qualified educator for the program?

Per the program, you need to be a K-12 teacher, and use the property as your primary residence for three years.

Teacher Next Door

Another initiative of the HUD, Teacher Next Door helps teachers and educators find the right mortgage option by connecting them to a wide network of programs and organizations that offer reduced mortgage rates and costs. Some of these also offer down payment rebates. The Good Neighbor Next Door program is included in this network but the scope is not limited only to revitalization areas. There are also residency requirements.

Home for Heroes

This program offers a 25 percent off your realtor fee when you purchase or sell a home with a realtor or broker who is signed up as an affiliate of the program. There is also a reduction in closing charges and home inspection fees.

Check out today’s rates.

Other mortgage alternatives

There are many organizations who serve the function, either backed privately or through local governments. You can check with your state for these specialized programs.

To make your hunt easier, use the HUD’s list of homebuying programs categorized by states.

You may receive community lending programs such as one offered by ICC Mortgage. Home loans for teachers also exist at some local areas, while some lenders and organizations offer programs with teacher-specific housing qualifications.

Or, perhaps, you don’t really need a teacher-directed program to get the best deal. If you’re cash-strapped, certain down payment assistance programs can help you get a loan to purchase a home. You can also look into some federally-insured mortgage programs such as the:

FHA loan – a loan program for first time homebuyers that offer competitive interest rates with only 3.5 percent down payment requirement for those who can meet the program’s eligibility requirements

USDA loan – a program for low-to-moderate income borrowers to purchase homes within areas designated by the US Department of Agriculture as rural (but includes many suburban areas)

If you’re low on your options, it might be worth your while to explore these programs as well.

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Rural Home Living: What are the Drawbacks of Buying a Rural Home?

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House

Everything has its upsides and downsides. If you’re thinking about buying a rural home, expect that with all the advantages of purchasing one, there are bound to be some drawbacks, too.

Living in a rural area comes with a promise of privacy and an abundance of natural resources. However, every home buyer should know that the drawbacks that come with rural living are as important as its advantages.

Knowing these things will help you decide whether or not buying a rural home would be worth your investment. Since we have already identified its advantages, here is a list of rural living’s drawbacks.

There’s more travel time

In the city, it’s normal to have places that are within walking distance from your home. However, it’s not always the case if you’re in a rural area.

If long drives are not something you have the patience for, perhaps you should rethink about buying a rural home. Compared to urban locations, rural areas will generally mean more driving and less walking.

Roads might not always be in their best conditions

Rural roads would not be as maintained as the once in urban areas. There will be times when roads in rural areas won’t be in the best shapes. This especially true during winter.

Which is why many families invest in snow tires for them to easily maneuver the road in the presence of snow and ice.

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Events and festivities are limited

There will always be town and county fairs in rural areas. There will be community events, concerts, and other festivities for the town locals.

We’re not saying that there won’t be any big events that will happen in these areas. However, major events and concerts will be rare. It won’t be as common as those in the big cities.

Internet connections might be slower

We’re all at a point in time where the internet becomes a necessity. It’s brought by our need to connect to the world and the continuous advancement of technology.

People now think that having high-speed internet connections is necessary for today’s economy. Slow connections would become counterproductive especially for businesses that rely heavily on the internet.

Dealing with wild critters

Living in rural areas would sometimes give you surprises like having to deal with wild critters. It could be raccoons, rats, skunks, coyotes, and other common critters that run wild in rural areas.

If you think about it, these can just be some minor disadvantages as there are ways to keep them out of your home as much as possible.

Water and power sources

Keep in mind that a lot of rural homes rely on wells rather than municipal water. If you’re not careful, these can give you problems in the future.

If you’re buying a rural home, make sure to invest in water testing and treatments to make sure that you have potable water reserves.

Power sources in rural areas could sometimes be unreliable. You will need to have a backup power source if you’re planning on buying a rural home.

A reliable backup power generating system would save you from power outages which can happen during harsh weather conditions such as hurricanes or snowstorms.

All hope is not lost

These drawbacks are something that can be dealt with especially if rural living is something you really want to pursue. Research and expert consultation will always come in handy.

Contact your real estate agent to get insights on how to address these disadvantages. It’s important to always know what to expect for you to know how to deal with them one by one.

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The Family Project: The Cost of Raising a Child

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Many of us are excited to have a new member of the family. Most married couples dream of having children and raising them to become strong and responsible individuals.

Having a child marks a new chapter in someone’s life. A chapter that is exciting, challenging and rewarding all at the same time. Raising your youngster entails planning and preparation. In fact, it needs financial readiness.

We ask, “What is the Cost of Raising a Child?” The United States Department of Agriculture can answer this question.

The Cost of Raising a Child

In the USDA’s report, The Cost of Raising a Child, the department has tracked the expenditures associated with raising a child since the early 60’s. This analysis looked at the costs influenced by the child’s age, household income, budget and location.

Based on the most recent data, in 2015, a middle-income couple with two children spends approximately $12,980 per year on each child. This is according to the Consumer Expenditures Survey.

The same survey says that to raise a child born in 2015, married couples may spend $233,610 (inflation not factored in) until the young one reaches the age of 17. 

If you break down the expenses, shelter/housing accounts for 29 percent of the costs;  taking up the largest share. At second place is food which is 18 percent. For those parents who have childcare or education expenses, it comprises 16 percent of the total child-rearing costs. The remaining 37 percent comprises the other necessities needed in raising a child.

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The Importance of Home

A home is one of the most important aspects couples and single parents need to consider when raising their little ones. The house itself, as a physical structure, provides safety and security from potentially harmful physical elements. The house as a home provides a sense of belongingness and physiological and emotional security. All of these factors are important in child-rearing.

A clean, safe, modest and decent dwelling provides children and the whole family a familiar and personal space to grow, explore and mature as individuals. The neighborhood where the house is situated also greatly influences the child’s development. These things go beyond the matters of money. Choosing the right house is as important as allocating the right budget.

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Modest and Decent Homes Thru USDA Loan

For couples who have been struggling to finance a decent and safe home, they can find affordable financing through the USDA home loan.

The USDA offers low to zero down payment options. To qualify, borrowers must have sufficient, good credit and low debt to income ratio. The primary target of this home financing program are households belonging to the low- to middle-income brackets.

For USDA guaranteed loans, it is the USDA-approved lender who determines how high or low the interest rate is. This is done during the underwriting process. For individuals applying for the USDA Direct Housing Loan, the current interest rate is at 3.25 percent (As of November 2017).

Financial readiness is crucial when a couple or individual plans to raise a family. While money isn’t the only thing that matters, it can be an instrument to ensure that a child grows and develops to be their best and the way they should be. Moreover, the home is the first place where a child develops their cognitive and social skills. It is the parents’ responsibility to ensure that they are sheltered, safe and secure.

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Find Approved Lenders for Your USDA Loan

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Small Houses

Compared to other government-backed mortgages, it’s harder to find USDA lenders – much more the good ones. How do you find the right servicer?

 

After searching for viable mortgage products that suit your needs and your finances, you finally decide to get a USDA loan.

Considered one of the best mortgage programs available today, a USDA loan requires no down payment, fixed interest rates, has flexible credit guidelines making room for borrowers with low credit ratings, and has no minimum limit on purchase price.

Unfortunately, finding lenders who offer USDA loans may not be as easy as finding lenders for other government-backed mortgages such as VA and FHA loans.

Get today’s mortgage rates!

 

Important notes

Before you commit yourself to lender hunting endeavors, it’s important that you first realize that the USDA does not fund USDA loans (there are exceptions); they only insure them (or a portion of them). That means the department pays for all or part of the loan if you ever default on your USDA loan payments.

In exchange for the guarantee, the lenders make sure that only borrowers who meet the USDA’s guidelines are approved for the loan. Both the lenders and the USDA evaluates your application. However, lenders also have the right to turn down your application, even when you meet the USDA’s qualifications. This is an inherent right among lenders since it is their investment placed at stake, after all.

Knowing your loan type is also necessary before you initiate the process of finding a lender.

The USDA has two main loan products:

a) Direct loan – Available to borrowers who earn less than 50 percent of the area’s median income, the USDA’s Direct Loan program offers mortgage for the purchase, construction, and renovation of a property. The borrower must be someone who have exhausted all other loan options but weren’t able to get any, and must not hold any other housing loan for that matter. The loan funds directly come from the department, hence the name.

b) Guaranteed loan – The more common loan option which you can get from a private lender, a Guaranteed loan is available to borrowers who earn less than 115 percent of an area’s median income. You also cannot hold any other housing program, or able to obtain financing from other lending sources.

Other points of consideration

Aside from the important notes above, the following should also be taken into account before you apply:

The property must be located in a place designated by the USDA as rural. Take a look at the USDA’s map for rural-identified areas.

Because the USDA loan program is designed to cater to the needs of low-income buyers, a high income will not land you an approval on this opportunity. Your income is compared to the area’s average income to determine your eligibility. That said, you should also know that the department considers your household’s total income for the same purpose.

Where to find a USDA approved lender

You can start here. This contains a list of lenders approved by the department.

You can also ask your bank if they offer a USDA loan or if they can refer you to one.

You may contact the department as well for some recommendations of available lenders in your area.

Another alternative is to check your local pages, or ask recommendations from friends and family.

Before you settle in a choice, make sure you shop around first. Lenders may vary in their charges and interest rates. You can use these information to compare lenders and narrow down your choices the best option.

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What Costs are Sellers Allowed to Pay on a USDA Loan?

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Money

In a seller-paid closing, sellers can pay up to six percent of the loan amount on a USDA loan. What are the costs included?

 

Getting a mortgage is intimidating.

Aside from saving for the required down payment, there is the long loan acquisition process, the appraisal, the pressure to lock at the right time, and of course, there’s the additional cost of closing.

For conventional mortgage programs, it is typical for borrowers to pay around 2 to 5 percent of the home’s purchase price at closing. For a $250,000, that’s around $5,000 to $12,500. Given the borrower pays the minimum 20 percent down payment requirement, that would be $50,000 plus whatever you have resolved to pay.

Unfortunately, most people just don’t have that money. In fact, only 35 percent of Americans have a couple hundreds of dollars in their savings accounts. Per a recent survey, it was found that 68 percent of Americans don’t even own a home they call their own.

Certainly, taking the step towards homeownership can be hard for many. This is where low down payment mortgage programs come in handy.

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One of these low down payment mortgages is the USDA mortgage program offered by the United States Department of Agriculture to eligible borrowers looking for properties in designated rural areas.

The USDA mortgage program offers zero down payment, with very low interest rates. Next to the VA home loan, it competes as one of the best mortgage programs available today.

But like any other mortgage program, the USDA still requires its borrowers to pay for closing costs. Typically, this can range from three to six percent of the purchase price of the home. It’s a good thing, however, that the program allows the borrowers to share the burden of the closing with the sellers.

Sellers can pay a determined percentage of the closing costs for the lender. But like any other seller contributions in a mortgage, there are limitations.

What fees are involved at closing?

In simple terms, closing costs are costs that are charged by the lender for originating the loan. This includes payment for the steps involved in processing the loan, from credit checks to appraisal, underwriting, and recording, among others.

Typically, you will see the following included in your closing costs:

  • Processing fee
  • Discount points
  • Origination points
  • Underwriting fee
  • Credit reporting fee
  • Escrow fee
  • Title search
  • Title insurance
  • Recording fee
  • Attorney fee
  • Appraisal
  • Transfer tax

Specific closing costs involved may vary widely from lender to lender.

What are seller contributions?

Basically, seller contributions refer to the amount of closing cost shouldered by the sellers through a seller-buyer negotiation. This cost is also known as seller concessions.

But how much can sellers really contribute?

In every mortgage program, there is always a set cap as to how much the seller can pay and the USDA is no different.

According to the rule, sellers can only pay up to six percent of the overall loan amount. That means that for a $250,000 home, the seller can pay up to $15,000.

However, the buyer cannot ask for more money than the cap amount. That is, it cannot exceed the actual cost of closing. So if the closing cost is only $7,500, the seller can only pay as much as that same amount.

Before any such decision is taken, you should know that the seller cannot provide concession if there is no determined home value.

The appraised value must come back at the adjusted sale price because if not, the buyer may need to pay for closing out-of-pocket.

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What are the USDA Streamline Refinance Guarantee Fees?

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what-are-the-usda-streamline-refinance-guarantee-fees

Refinancing your USDA loan with the USDA Streamline Refinance requires very little verification. What it does require, however, is the standard fees. The USDA Streamline Refinance guarantee fees are still 2.0 percent upfront and 0.5 percent of the outstanding principal balance annually. Because of the affordability of this loan, however, it is still generally a great deal for borrowers.

The Upfront USDA Streamline Refinance Guarantee Fees

The upfront USDA Streamline Refinance guarantee fees might seem like a lot, but the good news is you can roll them into your loan. Let’s look at an example:

John has a current USDA loan that is eligible for a USDA Streamline Refinance. His outstanding principal balance on his current loan is $107,000. The upfront guarantee fee is $2,140 and the closing costs are $2,000. John is able to take out a new USDA loan for $111,140, which is the total of the outstanding principal, the upfront guarantee fee, and the closing costs. This leaves John with no out of pocket expenses and a new loan with an interest rate that is 1.5% lower than his original rate – not a bad deal!

The upfront guarantee fees help the USDA fund their reserve account. This is the account they have set aside for times when they have to purchase a home back from a bank. This happens when a USDA borrower defaults on their loan long enough that the house goes into foreclosure and the bank takes possession. Because the USDA guarantees the loan, they pay the bank the amount guaranteed and take possession of the home, selling it an auction at some point down the road to try to recoup their losses.

The Annual Fees

In addition to the upfront guarantee fees are the annual fees every USDA borrower must pay. These fees are much lower than the upfront fee. On the streamline program, the annual fee equals 0.5 percent of the outstanding principal balance. This amount will change from year to year. The USDA bills the lender that services your loan for the full amount of the annual fee. The lender does not bill you for the full amount on a one-time basis, however. Instead, they bill you monthly with your regular mortgage payment in order to make the fees more affordable for you.

The USDA figures your annual guarantee fee based on the average outstanding principal balance for the year. This amount can be determined by looking at the amortization table you received at the closing. Every year, this amount will decrease as the more time that passes, the more principal you pay down. The annual fee will always be in existence since you will always have the principal to pay, but it will decrease as time goes on.

In order to understand the fee, let’s assume you have $105,000 outstanding on your loan as an annual average right now. Your total annual fee would equal $525. Rather than paying that amount all at once, the lender would divide it up equally amongst the 12 months, adding just $43.75 to your monthly payment.

Comparing Guarantee Fees

FHA loans are the closest type of government-backed loans to USDA loans, but their guarantee fees do not compare. The FHA upfront guarantee fee equals 1.75 percent of the loan amount, which is slightly lower than the upfront USDA Streamline Refinance guarantee fees; however, the annual FHA mortgage insurance fee equals 0.85 percent whereas the USDA annual fee equals 0.5 percent. Let’s look at a real example:

On a loan amount of $110,000, the FHA upfront fee equals $1925 and the USDA upfront fee equals $2200. The annual fee on a loan amount of $110,000 would equal $935 for the FHA loan and $550 on the USDA loan. In that first year, you would save $110 even with the higher USDA upfront guarantee fee and the savings continue year after year.

The USDA loan offers a very simple way to receive an interest rate that is at least 1 percent lower than your original loan. This enables you to save a significant amount of money every month, making your loan more affordable. Even with the guarantee fees involved, the savings will definitely help you to recoup those costs and help you get ahead in your finances much faster.

Can you Use a USDA Rural Loan Twice?

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Can you Use a USDA Rural Loan Twice?Can you Use a USDA Rural Loan Twice?

USDA loans were created to help low-income families be able to have suitable housing that they can call their own. The program is only available in rural areas of the United States, but that does not mean that it is not available in your area. A large majority of the United States is in a rural area, according to the USDA. They base their decision mostly on the population of the area as is determined by the census. If you are unsure which areas in your county are considered rural, consult the USDA website to see their boundaries – you might be surprised to see which areas are considered rural and are eligible for this incredibly giving and flexible financing.

The USDA loan requirements make it possible to get a loan for 100% of the purchase price; this means you do not need a down payment. To make it even better, you are able to roll your mortgage insurance fees into the loan above the 100%, making it very easy to afford the loan. The guidelines pertaining to this loan are rather flexible and focus on your ability to afford the loan while not making too much money. It is strictly a loan for those that would be otherwise unable to obtain any other type of financing. The basic USDA loan requirements are that you live in the home and that you do not own any other home; that you live in the US and are a citizen; and that no non-occupying borrowers exist on the loan. The goal of the USDA is to provide housing for those that would otherwise be unable to obtain clean, safe, and decent homes in the area they desire to live.

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Qualifying for a USDA Loan

Qualifying for a USDA loan is similar to any other loan, especially like other government-backed home loans such as FHA and VA loans. The requirements are as follows:

  • You must be a citizen of the US
  • Debt to income ratio must not exceed 29 percent on the front end and 41 percent on the back end
  • Your income must be consistent over the last 2 years
  • Your employment should be consistent over the last 2 years
  • A credit score over 620 with no collections within the last 12 months

The USDA program is meant for borrowers that have low income and cannot secure financing from any other source, which is why using this loan twice is not allowed. The only time you could use the USDA program a second time is if you are without housing right now, even if you were a homeowner before and used USDA financing. For example:

Joe owned a home 5 years ago. The home was in a rural area and was secured with USDA financing. Joe was forced to foreclose on that home 3 years ago, leaving him without a home for a while. Since then he has been renting an apartment in order to build his non-traditional credit history back up and to save money. Today, he is ready to become a homeowner again and found a home in a rural area. His credit score is 625 and his debt ratio is 29/40. He has consistent employment with the same employer for the last 3 years. Because it has been three years since the foreclosure and his other conditions meet the requirements of the loan, he is eligible for a second USDA loan.

If, on the other hand, Joe’s foreclosure was within the last 2 years or his credit score was not above 620 yet, he might not be able to qualify for a second USDA loan. Any borrower whose credit score is below 620, yet above 580 might still qualify, but will be under much tougher scrutiny than someone with a higher credit score. If Joe did not have reestablished credit yet, he could qualify using nontraditional credit as well; however, those borrowers also undergo additional scrutiny. Nontraditional credit would mean using things like rent payments, utility payments, and insurance payments to qualify. The lender would need to see the last 12 months’ worth of those payments and proof that they were made on time in order to be considered for the loan.

The long and short answer regarding whether you can use a USDA loan twice is that it depends on the situation. If you currently own a home, then the answer is cut and dry – you cannot use USDA financing again. If, however, you used it in the past and want to use it again and cannot secure any other type of financing, then you can use it again as the USDA Rural Loan is not reserved strictly for first-time homebuyers.

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