# Presentation: 731092

## NEW YEARNEW OPPORTUNTIES!Robert McDonald, Housing Program Director robert.mcdonald@vt.usda.gov802-828-6015 

## VT/NH USDA RURAL DEVELOPMENT GUARANTEED LOAN PROGRAM   

**We DON’T inspect meat!**
**(or peanut butter)                           **
**We DON’T finance farms!**

**Notes:**
Be sure to keep this guide! 
Take it with you on visits for reference (guard the payout slides if necessary). 
If you need to check on an answer to a question you will have the information with you.
  You don’t want to have a “deer in the headlights” look on your face when they ask you if the builder can submit his own draw schedule. 
The answer to that question is YES!    

## This is NOT Rural Development!   

**This is ****NOT**** Rural Development!**

**THIS IS MORE LIKE IT!**
**NO MAXIMUM PURCHASE PRICE**

**Notes:**
These are some good examples of homes RD can finance.  New construction is also encouraged.  
(I usually get these pictures from a real estate website for the area I am presenting to) 

## More lenders choose 100%  Guaranteed financing FIRST! 

**True 100% program **
**No maximum purchase price **
**No monthly mortgage insurance **
**Expanded qualifying ratios 29/41 and above **
**No asset limit / No reserve minimum**
**Generous income limits:  ADJUSTMENTS **
**Not FICO driven:  ****NOT A SUB-PRIME SOLUTION!**** Emerging Markets/Non Traditional histories, etc.**
_**NOT**_** just for first time homebuyers **
**Creative financing options to maximize buying power**

## Eligible areas:  http://eligibility.sc.egov.usda.gov/eligibility/wecomeAction.do 

**Notes:**
Wondering how to discover what areas are eligible for 100% Guaranteed financing and which ones are not?  
IT’S EASY!!
Log on:  www.rurdev.usda.gov/il/grh.htm
Mark this as a favorite—it is the Illinois website to all that is guaranteed!  
Under “Hot Items” click on “Income/Property Eligibility”  

## Click here for property eligibility

**Click here for property eligibility**
**Click here for income limits **

**Notes:**
Under “Property Eligibility”  Click on “Single Family” 
A screen will pop up with an “Accept” or “Decline” button...hit “Accept” to move forward into the website.  The reason for the disclaimer is because the maps are not 100% accurate for all areas.  For example in Northern Illinois “Elwood” will appear to be ineligible, but it is indeed eligible.  Likewise in Southern Illinois “Bethalto” appears to be ineligible, when it is in fact a newly added eligible area.  By clicking “Accept” you are merely accepting the fact that the maps may not be 100% up to date and correct.    
When you have questions do not hesitate to contact your local Rural Development office—we’re here to help! 

## If you have a complete address including the zip code enter it here

**If you have a complete address ****including the zip code**** enter it here**
**Just browsing in a county?  Click on “VERMONT” and then click on the county you are interested**

**Notes:**
If you have a complete address including the zip code, enter it and then click on “Get Map”.  The computer will map the address to it’s exact location and give you in writing your eligibility determination.

If you do not have an address, just a curious shopper in McLean County, click on “Illinois” on the US Map.   

## If you are interested in Washington County...  click on it! 

**If you are interested in Washington County...  click on it! **

**Notes:**
The list of counties on the right contain ineligible areas.  McLean county is listed so you can either click on “McLean county” on the map, or on the list.  

## Washington county is 100% eligible! 

**Notes:**
This is what a generic eligibility map of a county will look like.  The light areas are all eligible, and the darker orange areas are ineligible for program financing.  

If you wish to get a better look you can click on any of the tools down the left hand side of the map.  The very first icon (magnifying glass with a plus on it), if you click on the icon, and then click on the map, it will instantly zoom you in for a closer look.  You can even zoom in close enough to read street names, and determine where a line of eligibility begins---extremely useful when you know some towns are beginning to build lots of new construction outside of the incorporated areas.  
Again—when in doubt pick up the phone and call.  Rural Development can answer your eligibility questions for you in seconds!  

## If you had selected Chittenden county you can see a few cities are ineligible. 

**If you had selected Chittenden county you can see a few cities are ineligible. **

## More Benefits:     

**Downpayments accepted up to 19%**
**Gift/Grant funds accepted  **
**Generous income limits **
**Deductions allowed for children, daycare, and more!**** **

- MOD. INC-GUAR. LOAN
- Washington County “Adjusted” Income Limits
- 1 person:  $52,750		5 person:  $81,400
- 2 person:  $60,300		6 person:  $87,400
- 3 person:  $67,800		7 person:  $93,450
- 4 person:  $75,350		8 person:  $99,450

- GENEROUS “ADJUSTED”               INCOME LIMITS

## Search out DEDUCTIONS!  

- Dependents: $480 each
- Children 18 yrs. or younger
- Disabled household members 18 yrs. or older
- Full time students 18 yrs. or older
- Care expenses of minor children 12 yrs. or younger that enable the employment of a household member
- Elderly family:  $400
- 62 yrs. of age or older, disabled, or surviving spouse of deceased elderly client
- Medical expenses not to exceed 3% of gross income

## Deductions In Action! 

- Family of 3               $74,000 gross salary
- Moving to Washington county, VT
**Waashington county**
** ****adjusted income **
** ****limit for 3:  $67,800**

**$73,000 Gross**
**- ****	****$480  1 child**
_**-  $5200 daycare**_
**	****$67,320**

**THEY QUALIFY! **

## REALITY CHECK

**KIDS ARE EXPENSIVE!**
**Daycare:  $100 - $300 per week **
**After school care:  $75 - $150 per week**
**Summer months:  full time care for all children**
**No tax returns necessary!  Please provide receipts or letters from providers stating prices.   **

## FIND THE DEDUCTIONS!Qualify more clients!   

**Family of **_**4**_** moving to Washington Co.: **
**3 yr old: daycare  $200 wk x 52= $10,400**
**9 yr old:  after school $50 wk x 9 mo. = $1,800**
**2 kids x $480 = $960**
**$80,960**
**possible gross salary**

## Guaranteed to compete! 

**$175,000 loan **
**$4,000 annual real estate taxes **
**$600 annual home insurance  **
**        ****premium**
**YOU BE THE JUDGE!****  **

## Slide 19

**Roll fee in above appraised value: No out of pocket needed **
**Cheaper than PMI**
**Best insurance coverage for the lender (90%) **
**Least cost to client **

**2% GUARANTEE FEE IS A DEAL! **

## Guarantee Fee vs. PMI

**$3,500 guarantee fee**
**vs**
**Freddie 100:  2.08 years**
**HP/My C:         3.39 years**
**95% LTV: ****	****   3.5 years**
**Flex 100:          4.0 years **
**FHA: ****	****	****   1.02 years**** **
**(time to break even) **
**Average stay of homebuyer:  5-7 years**

**Notes:**
Freddie Home Possible with reduced PMI a shade over 3 years

## UPDATES! INTERPRETATIONS!  CLARIFICATIONS! 

## WHO APPROVES THE LOAN?    

_***THE LENDER!***__*** ***_
**Rural Development does **_**not: **_
**Underwrite loans**
**Issue credit waivers**
**Inspect properties**

## Credit standards

**What are your credit standards?**
**Explanations acceptable to your standards are given special consideration**
**You decide if open collections must be paid**
**Will repayment be impaired?**
**Credit scores over 620 require no explanations**

## AN 4237:  Utilizing Credit Scores 

**620 and above qualifies for streamlined documentation                                       **(NO VOR’s, No adverse credit explanations)
**619 and below:  be careful of too many risk layers                                                        **(ratios waivers, _and_ adverse credit waivers, _and_ no previous housing history, and etc.)
**    **

## AN 4216:  Collection Accounts

- UW will determine what is to be paid
- Tax liens, judgments, federal debts must be cleared
- Adverse credit waiver must be issued on 1008 by UW if collections remain open
- UW must document decision

## Slide 27

**Notes:**
This is the NEW 1980-21 Request for Single Family Housing Loan Guarantee form.  Notice the revision date in the upper left hand corner:  6/06.  If you are not using this form then you are missing out!  

The new 1980-21 includes information from the old AD 1048 Debarment form, thereby eliminating one RD form for your files.  

This upper portion of the form is self explanatory.  Please write in the applicant’s name, address, and county, etc. 

Lender I.D. No.:  This is your Tax ID
Lender Name:  The bank 
Lender Contact Person:  This can be the loan officer, underwriter, or loan coordinator.  RD will issue the conditional commitment to the cntact person provided on this form.  RD can never have too many contacts, so do not worry about adding additional names if necessary!    

## Slide 28

**Notes:**
#1:  The purpose of this question is to determine where the loan will be processed.  If the applicant is related to someone in a local RD office, then their loan can not be processed at that office.  The State Director re-assigns the file to a local RD office with no relatives present. 

#2:  Please check citizenship status

#3:  The veteran/first time buyer boxes are for internal RD data analysis purposes only, no bearing on eligibility. 

#4:  Number of persons in the household:  THIS FIGURE SHOULD MATCH THE 1003 APPLICATION   

#5:  Please check the appropriate box describing the applicants credit history

#6:  Annual income:  THIS IS THE GROSS INCOME FIGURE 

#7:  Adjusted income:  This line determines if they qualify for RD financing.  If you made any adjustments to the gross income (children/daycare, etc.) this figure should be at or below the income limits for the county they wish to purchase within.  

#8:  Fill in debt and PITI ratios 

#9:  Fill in interest rate and P&I figures

#10:  The interest rate is base on:  check the appropriate box, and then check if the rate is locked or floating 

#11:  Do not read into this statement!  If the applicant(s) qualify for Guaranteed financing then they qualify.  There is no need to go any further.  

#12:  Funding:  Many secondary market lenders accept RD’s conditional commitments “Subject to fiscal year funding” in the event Guaranteed allocations run out.  GUARANTEE MONEY IS ALWAYS AVAILABLE!  

#13:  Fill in CAIVRS information

#14:  Purpose:  Purchase home for $150,000 on line 1, and maybe on line 2 closing costs and guarantee fee  ($2,000 c.c + $3,040 g-fee) = $5,040,   TOTAL LOAN = $155,040

MORE TO COME ON THE 2% FEE TOPIC!   

## THE UNDERWRITER WILL SIGN HERE

**THE UNDERWRITER WILL SIGN HERE**
**By signing here you are acknowledging that you did underwrite the file.  **
**The borrower(s) will each sign here.  **
**FAX OR PHOTOCOPIES OF SIGNATURES ARE NOW ACCEPTED!  **

**Notes:**
BIG NEWS!  Faxed or photocopies of the borrower(s) signatures on the 1980-21 are now accepted by RD.  

AGAIN, this new revised form includes the debarment information, so the AD 1048 is not necessary when the new 1980-21 is executed.  

## RD 101:  File Flow

- Lender interviews applicant
- Lender submits to their  underwriter
- Lender submits approved underwritten file to RD
- RD issues conditional commitment in 24-48 hours
- Loan closes
- Lender submits closing package to RD
- RD issues Loan Note Guarantee

**Notes:**
Once again, RD is only interested in seeing approved and underwritten files. RD is not an underwriter.  We expect each underwriting lender to review and approve all loans that they wish to see close.  
RD will commit to extending a conditional commitment to the lender 24-48 hours after a file is received.  

## Building your business with Guaranteed Financing!

## Be a trusted advisor

- $230,000 purchase
- 10% downpayment saved
- Debts:
- Car 1:  $350/mo.9 months left
- Car 2:  $400/mo.  2 years left
- Visa:  $6,000
- Mastercard:  $3,000
- Old Navy:  $500
- Fingerhut:  $650
- Furniture:  $2,500
-  $12,650 credit card debt alone!

## Which would you choose? 

_**100% Guaranteed**_
- $230,000 + Guarantee fee, taxes & insurance
**$1,932**
- Clients retain $23,000 to pay off debt, save, invest, etc.
- By paying off Car 1 and all credit cards they would still have $7,350 plus $350 additional monthly income ($4,200 per year)
- ALL FOR $39 MORE PER MONTH!

_**10% Down Conventional**_
- $230,000 – 10% ($23,000), taxes & insurance
**$1,893**
- Clients are out $23,000 _and _they have over $25,000 in debt
- Home Equity Loan?
-       Now they get to PAY to
-       borrow their own money!      (If they even have a credit
-       score high enough to  qualify for the loan)

## 5% down with RD

_**Put down 5% with RD**_
- $230,000 – 5% ($11,500) + Guar.fee, tax, & ins.
**$1,852**
- Client retains $11,500 for debt reduction, savings, ER fund, etc.
- 2% FEE IS THE MOST COST EFFECTIVE OPTION!

_**80/20**_
- 80%:  $184,000   6.5%
- 20%:  $46,000     8.0%
- Plus taxes and insurance
**$1,967**
- Need a great credit score
- 2nd mtg is tied to HELOC and prime rate it will go up—may not be a fixed rate
- Client has to make two payments

## Purchase and repair options

**Escrow for repairs & get Note Guarantee with no delay**
**Not just weather related repairs**
**Homebuyers get to close and move in before repairs are completed**
**Up to 180 days to submit completion certificate**

## Myth #1:  Inspections are too picky; house will never pass......

- HUD Handbook 4150.2 standards (drastically revised 12/2005)
- Home Inspection
- In a survey of real estate professionals conducted by the American Society of Home Inspectors, 99% of respondents said they always or often make the recommendation that buyers get a home inspection.
- RD will alert you IF any repairs are necessary to meet minimum standards.

**Notes:**
You can speak to what exactly your state requires, but these are the basics. 
The VC Sheet is being retired as of 1-1-06, SO it is important to let them know that the new FHA appraisal will include the same inspection that they were getting with the VC sheet.  
The FHA roster appraiser is still the most cost effective way to meet RD guidelines. 
They always have the option of getting a full interior/exterior conventional appraisal AND a state licensed home inspection. 
I like to use the survey quote because I find it very hard to believe that 99% of real estate professionals said they always or often recommend a home inspection.  I am not sure about your area of the country but in Illinois we run into real estate professionals who would rather undergo Chinese water torture than have a home inspection done.  
Use this opportunity to let the real estate agents and lenders know that RD is not looking for every burnt out light bulb or smudge on the walls.  In fact, if a house isn’t going to pass inspection.....then what kind of house is this???  
RD is looking for the really “picky” items such as:
 smoke emitted from the furnace when turned on, or it makes irregular noises
Holes in the furnace or A/C unit
A septic tank that resembles an in-ground swimming pool
Flooring that is rotted or spongy
The roof should have an estimated life of 2 years.....if you know anything about roofs you should know that #1:  2 years is not much and #2:  roofs are not cheap!  
Bare wiring 
Toilets that actually WORK!
Broken windows....that’s really the mark of a classy home, broken windows
If a house is exhibiting these traits....I usually say they should be looking for a better house. 
RD has so many benefits to the clients to help them afford a decent, safe, and sanitary home, they should not have to settle for this type of a dwelling.  
Usually by now they realize that we are only looking for basic items that they themselves would not want to come home to this evening.  
THE GOOD NEWS:  Get the appraisal with an “As-Improved” value and roll the cost of the repairs and escrow into the loan—now you are back at the closing table.  They get their check, the buyers get their home, and these repairs will be included and taken care of as soon as they can.  
We may require silly things like working plumbing....but if there is a problem RD can help the client fix it and not hold up the closing.  This is a perk no one else can offer!  

## Which repairs are required? 

- Missing handrails
- Cracked window
- Dripping faucet
- Peeling paint on doorframe/windows
- Flat roof on garage:  could not inspect
- No smoke detectors
- No GFI’s in kitchen/bathrooms

## NONE OF THOSE REQUIRE REPAIR! 

**Notes:**
Many minor repair items have been removed from the list of minimum property standards for the HUD Handbook 4150.2.  
Remember:  The Guaranteed loan is for more moderate income borrowers.  They should be aware and able to handle the responsibilities of homeownership.  

## Slide 39

## Myth #2:  RD loans have recapture, I don’t recommend them! 

- Guaranteed loans have                   _**NO RECAPTURE**_!!
- Clients make full payments to their lender.

**Notes:**
This is not RD’s money at the closing table, it is the lender’s!  Guaranteed loans are the lender’s loan, with the lender’s money.  RD is just insuring it for them in the event of a loss.  
Recapture is not a dirty word.   I usually take a small amount of time to educate them briefly on what recapture really is so that the Direct program isn’t giving a sour impression.  
  If I give you a dollar and ask for 50 cents back, who ripped off on that deal???? I DID!  I would be the government in this scenario.  This is usually the most effective way of demonstrating recapture.  It’s also a good time to remind them that we are “recapturing” their tax dollars to recycle them to other homebuyers.  They usually appreciate it at this point.  
 Ignorance is not bliss, so EDUCATE, EDUCATE, EDUCATE!  

## Myth #3:  RD loans take too long to close

**THIS IS YOUR LOAN!  ****How fast can **_**you**_** complete: **
**      *****  appraisal**
**      *****  underwriting**
**RD turns around complete underwritten files in 24-48 hours**

**Notes:**
RD IS NOT AN UNDERWRITER!  Don’t send us deals that you don’t want to fund.  That is why it is so easy to get a quick turn around time from RD. 

## Myth #4:  Real estate in my area is too high priced for RD loans

**NO MAXIMUM PURCHASE PRICE!**
**Expanded Qualifying Ratios**
**+ **_**Creative Financing Options**_
**BUYERS QUALIFY FOR A HOME THEY LOVE! **

**Notes:**
If they think RD is only for 1200 sq ft properties with no bathroom by the kitchen and no fireplace, etc....then they are living in the past and they are WRONG! 
 With no maximum purchase price limits RD can finance the homes that buyers want. 

## Myth #5:  RD loans are for low income                           applicants and “fixer-upper”                           homes

**Generous “adjusted” income limits apply **
**RD encourages newer homes and new construction**

**Notes:**
This is a picture of a $210,000 home that RD financed, this doesn’t look like a shack to me.  

## 100% Guaranteed Rural 
Development Financing is: 
Flexible
Affordable
Profitable
Easy
It’s the BEST!  

**Development Financing is: **
**Flexible**
**Affordable**
**Profitable**
**Easy**
**It’s the BEST!  **

**Notes:**
Sum it up for them.  
RD offers all of these benefits and it is EASY!  

## WE BUILD COMMUNITIES!  

**One home at a time! **

**Notes:**
Good luck to you all.  I hope you find the materials I designed helpful, informative, and easy to use.   
Do not hesitate to contact Kris if you want assistance with Outreach.  
Illinois did a lot of new construction last year, so there are growing communities.  
I know you will do a fantastic job!  Thank you for your hard work and dedication!   

## Interested? Contact: 
NH: Colleen Ladew
603-223-6035
Colleen.ladew@nh.usda.gov
VT: Cheryl Ducharme
802-748-8746 x 107
Cheryl.ducharme@vt.usda.gov

www.rurdev.usda.gov

USDA is an equal opportunity provider, employer, and lender.  To file a complaint of discrimination write USDA, Director, Office of Civil Rights, 1400 Independence Avenue, S.W., Washington, D.C., 20250-9410 or call (800) 795-3272 (voice) or (202) 720-6382 (TDD).   

**NH: Colleen Ladew**
**603-223-6035**
- _[Colleen.ladew@nh.usda.gov](mailto:Colleen.ladew@nh.usda.gov)_
**VT: Cheryl Ducharme**
**802-748-8746 x 107**
- _[Cheryl.ducharme@vt.usda.gov](mailto:Cheryl.ducharme@vt.usda.gov)_
- _[www.rurdev.usda.gov](http://www.rurdev.usda.gov/)_
**	**
**USDA is an equal opportunity provider, employer, and lender.  To file a complaint of discrimination write USDA, Director, Office of Civil Rights, 1400 Independence Avenue, S.W., Washington, D.C., 20250-9410 or call (800) 795-3272 (voice) or (202) 720-6382 (TDD).   **