# Presentation: 247503

## USDA, RURAL DEVELOPMENT

***HOME BUYER***
***EDUCATION****** ******CLASS***

## Agenda

**I****.****	****Why Are You Here?****	**
**II.  ****	****Renting vs. Buying**
**III. ****	****Preparing for Home Ownership**
**      ****	****A.  Up-Front -- Closing Costs**
**      ****	****B.  On-Going Costs**
**      ****	****C.  Hidden Costs**
**      ****	****D.  Repayment Ability -**
**	****	**** ****Qualifying Ratios**

## Agenda (cont.)

**IV.** 	**Credit Reports**
**V.  ****	****Shopping for a Home**
**      ****A.  New Vs. Used**
**     ****	**** ****B.  Selecting a Realtor or a Builder**
**VI. ****	****Home Ownership Responsibility**
**VII. RD Loans & Application Process**

## Up Front,
On Going
and
Hidden Costs

- Up Front,
- On Going
- and
- Hidden Costs

## Up-Front Costs will include:

**Down Payment**
**Various Closing Costs**
**Moving Costs**
**Settling in** **Costs**

**Budget**
**     ****Movers**

## On-Going and Hidden Costs

**Monthly Mortgage Principal & Interest**
**Real Estate Taxes**
-     (1 / 12 per month to           Escrow)
**Homeowners Insurance**
- 	(1 / 12 per month to Escrow)

## On-Going and Hidden Costs

**Maintenance**
**(A/C, wiring, plumbing, roof, yard, appliances, painting, floor cover, screens, windows, doors, driveway, etc.)**

## On-Going and Hidden Costs

**Homeowners**
**  ****Association Fee**
-      (if applicable)
**Utilities - (deposits, monthly payment for use electric, water, sewer, telephone, cable, etc.**

## Remember:

**AS A HOMEOWNER, YOU ARE NOW RESPONSIBLE FOR **_***ALL***_** MAINTENANCE  EXPENSES**

## Available Cash and Assets:

**List all of your sources of cash and other**
**assets, then decide how much you want to **
**apply toward up-front housing costs such as **
**the down payment and closing costs.**
**Remember, you will want to reserve some of**
**your assets for financial security.  **
**It is **_**not**_** a good idea to totally deplete your **
**savings to purchase a home.**

## Amount Available for Up-Front Housing Costs

## Amount Available for Up-Front Housing Costs

## How You Can Increase Your Borrowing Power!

**Reduce existing debts (charge cards, installment loans, etc.)**
**Wait until income increases (raises, job changes, part-time jobs, etc)**
**Put off “Big Ticket” items (car, furniture, vacations****)**

## Qualifying Ratio or Housing Expense Ratio

## “Sample Qualifying Ratio:”

- _House Payment (PITI)_
- Gross Monthly Income

- _PITI plus Existing debt__ _
- Gross Monthly Income

- 29%

- 41%

## Ten Basic Rules of Money Management

- 1.	**PLAN** - Plan for the future, major purchases and periodic expenses.
- 2.	**SET FINANCIAL** **GOALS** - Determine short, mid and long range financial goals

## Ten Basic Rules of Money Management

**3**.**	****KNOW YOUR FINANCIAL SITUATION - **Determine monthly living expenses and monthly debt payments.  Compare out-going to monthly net income.  Be aware of your total debt.

## Ten Basic Rules of Money Management

- 4.  **Develop A Realistic Budget** - Follow your budget as closely as possible.  Evaluate your budget.  Compare actual expenses with planned expenses, this should include “MAD MONEY”

## Ten Basic Rules of Money Management

**5. Don’t Allow Expenses to Exceed Income** - Avoid paying only the minimum on your charge cards.  Don’t  charge more every month than you are repaying to your creditors.

## Ten Basic Rules of Money Management

**6. Save **- Save for periodic expenses, such as car and home maintenance.  Save 5 - 10 % of your net income.  Accumulate 3 to 6 months salary in an emergency fund.

## Ten Basic Rules of Money Management

**7. Pay Your Bills On Time** - Maintain a good credit rating.  If you are unable to pay your bills as agreed, contact your creditors and explain your situation.  Contact Consumer Credit Counseling for professional advice.

## Ten Basic Rules of Money Management

**8.  Distinguish the Difference Between Wants and Needs** - Take care of your needs first.  Money should be spent for wants only after needs have been met.

**VS**

## Ten Basic Rules of Money Management

**9.  Use Credit Wisely** - Use credit for safety, convenience, and planned purchases.  Determine the total you can comfortably afford to purchase on credit.  Don’t allow your credit payments to exceed 20% of your net income.

## Ten Basic Rules of Money Management

**10.  Keep a Record of Daily Expenditures** - Be aware of where your money is going.  Use a spending diary to assist you in identifying areas where adjustments need to be made.

**Spending**

**Diary**

## Indicators of Unacceptable Credit

- No Credit History
- Payments on any account which was delinquent for more than 30 days on two or more occasions within a 12 month period
- A foreclosure that has been completed within the last 36 months.

## Indicators of Unacceptable Credit

- An outstanding Internal Revenue Service tax lien or any other outstanding tax liens with no satisfactory arrangement for payment.

## Indicators of Unacceptable Credit

- Two or more rent payments paid 30 or more days late within the last 2 years.

## Indicators of Unacceptable Credit

- Outstanding  collection accounts with a record of irregular payments with no satisfactory arrangements for repayment, or collection accounts that were paid in full within the last 6 months, unless the applicant had been making regular payments previously.

## Indicators of Unacceptable Credit

- Non-Agency debts written off within the last 36 months, unless the debt was paid in full at least 12 months ago.

**PAID IN**
**  ****FULL**

## Indicators of Unacceptable Credit

- Agency debts that were debt settled within the past 36 months, or are being considered for debt settlement.
- Delinquency on Federal debt.

## Indicators of Unacceptable Credit

- A court-created or court-affirmed obligation or judgment caused by nonpayment that is currently outstanding or has been outstanding within the last 12 months, ***except:***

## Indicators of Unacceptable Credit

- A bankruptcy in which:
- Debts were discharged more than 36 months prior to the date of application; or

## Indicators of Unacceptable Credit

- Where an applicant successfully completed a bankruptcy debt restructuring plan and has demonstrated a willingness to meet obligations when due for the 12 months prior to the date of application.

## Indicators of Unacceptable Credit

- A judgment satisfied more than 12 months before the date of application.

## Indicators of Unacceptable Credit

**An applicant with an outstanding **
**judgment obtained by the United **
**States in a Federal court, other **
**than the United States Tax Court,**
**is not eligible for a Section 502 loan.**
**This requirement is statutory and**
**cannot be waived.**

## Shopping for a Home?

**The following questions should serve as a partial checklist for the prospective home buyer:**

## Outside the Home:

- Are adequate shopping facilities close by?
- Are Churches available and convenient
- Is the community well planned?
- Are police and fire protection adequate

## Outside the Home:

- Are schools located to suit you?
- Is  a hospital or medical center nearby?
- Are recreational facilities nearby?
- Are trash and garbage disposal arrangements adequate or frequent enough?

## Outside the Home

- Are there adequate parking spaces or garage facilities for your needs?
- Is public transportation adequate and handy?
- Is there  a reliable and drinkable source of water with adequate pressure?

## Outside the Home

- Is the sanitary sewage disposal system reliable and adequate?
- What is the view out the front door?  Are there eyesores?  Do the neighbors appear to take good care of their properties?

## Outside the Home

- What is the traffic like on neighborhood streets?  A street empty of cars on Sunday afternoon may be clogged with traffic on weekday rush hours.  If the streets are busy, are there sidewalks?

## Outside the Home

- Is the land well drained?
- Are lots or units arranged to suit your family lifestyle?
- Has proper landscaping been done to prevent erosion?

## Inside the Home

- Do walls seem sound and smooth, floors firm and level, carpentry well fitted and joined?
- Is lighting good during both day and night?

## Inside the Home

- Are rooms large enough to accommodate your furniture and is there sufficient wall space for arranging furniture?

## Inside the Home

- Does the kitchen have good lighting and ventilation?  Are there enough outlets for plugging in all your kitchen appliances?
- Are there ample cabinets and counter work space for your family needs?

## Inside the Home

- Do doors, windows and drawers work easily and safely?
- Does plumbing work smoothly and quietly with adequate water pressure and free-flowing drains?

## Inside the Home

- Is heating and cooling and ventilating equipment satisfactory?
- Are there enough electrical outlets well arranged and sufficient amperage for your electrical equipment?

## Inside the Home

- Are temperature controls located in safe and convenient places?

## 	RURAL DEVELOPMENT LOANS

**All homes must be located in a rural area**

## 502 Guaranteed Loans

-   *30 year fixed rate. * Not subsidized.  *Low to Moderate income group. *Can be either new construction or existing home.  *Applicants should meet qualifying ratios of 29% PITI and 41% MOTI.  *May qualify for “SHIP” down payment assistance as needed.  *Apply directly with lender. *All applicants eligible for guaranteed loan who apply directly with Rural Development will be referred to a lender.

## 502 Direct Loans:  All direct loan  programs

- Apply directly with Rural Development
- 33 year term
- Fixed interest rate
- Qualifying ratios for low income:
-    33% PITI   41% MOTI
- Qualifying ratios for very low income:
- 29% PITI  41% MOTI

- All applicants will be reviewed for participation with a local lender.
- All applicants will be considered for “SHIP” down payment assistance as needed.
- Must have good credit.

## 502 New Construction

- May use any licensed contractor.
-  Rural Development does maintain a list of participating contractors.
- All new construction loans carry a one year builders warranty

## 502 Existing Home

- No Warranty
- Home must meet the HUD Handbook Guidelines

## 502 REO PROPERTY

- An existing home which Rural Development has taken back through foreclosure.

## 502 Assumption/Transfer

- An existing Rural Development borrower who wishes to sell their home.
- No Warranty
- All homes must be in condition to meet HUD Handbook Guidelines

## 	QUESTIONS?	

**RURAL DEVELOPMENT**
**863-533-2051 EXT. 4**
- _[http://www.rurdev.usda.gov/fl](http://www.rurdev.usda.gov/fl)_