…and, it’s not hard to qualify!
This Post is about our SELECT RD loan. It’s a government sponsored loan that many people just don’t know very much about, and consequently it’s not as widely used.
…but, oh what a great loan program!
I’m going to educate you in detail about this amazing loan program, but first I want to tell you what’s great about it…
1) You don’t have to put any money down! …that’s right! It provides 100% financing.
2) You don’t have to have perfect credit.
3) The seller can pay all of your closing costs and prepaid taxes and insurance. You can literally buy a house with no money out of your pocket!
4) Very low monthly mortgage insurance means a low monthly payment!
Here are the details on the SELECT RD program…
It’s a lending program that is put out by the US Department of Agriculture. The purpose of the program is to promote rural development of housing.
…but, it’s not just for rural areas. It’s also for outlying suburbs to major metropolitan areas.
Two important restrictions to this program you need to know up front…
1) You can make too much money as a family to qualify for this program. The income limits vary county to county, but if you are a family of 3 to 5 and you make over 100k – you may make too much to qualify for this program.
If you call our office and give your in-come figures to one of our loan consultants we can see very quickly if you fall in the limits of income.
2) There are geographic restrictions. The purpose of this program is to promote home ownership in outer suburbs and rural areas. So, if you are wanting to buy in a larger city, the odds are you can’t use Select RD to do it.
We have a geographic map in our of-fice that determines qualified areas for this loan program. Simply contact our office and give us the town, or if you have it the address of the home you are interested in and we can see quickly if it will qualify.
Credit for SELECT RD:
We can go all the way down to a 580 credit score on the SELECT RD program!
Applicants must have a credit history that indicates a reasonable ability and willingness to meet obligations as they become due.
A credit history reflecting any or all of the following is considered unacceptable credit history:
• More than one 30-day late within the past 12 months.
• Bankruptcy or foreclosure discharged less than 36 months.
• Outstanding judgments within the past 12 months.
• Two or more rent payments 30 days late within the past 3 years.
• Outstanding tax liens or delinquent federal debt with no payment arrangements.
Clear CAIVRS:
The government doesn’t like it when you have defaulted on a government insured loan.
They have a database called CAIVRS that they check to see if you have ever defaulted on any government insured loans. These can be student loans, or other mort-gages.
Debt to Income Ratio:
The debt to in-come ratios that Select RD uses are 29% for the first ratio, and 41% on the back ratio.
However, we frequently get higher ra-tios accepted through the automated approval system we use. To calculate the front ratio – you would take your gross monthly income and divide it by the total mortgage payment. The ratio should be 29% or less.
For the back end ratio you would take your gross monthly income and divide it by the total house payment, plus your minimum monthly payment on all of your other debt.
The resulting number should be 41% or less. We can go up to 50% on the back end ratio if we get an automated approval.
Summary of the advantages of the SE-LECT RD program…
• SELECT RD loans are 100% loans. No down payment is required!
• Low monthly mortgage insurance. At the time of this writing the monthly MI is .40 x the loan amount divided by 12.
• Flexible credit guidelines.
• SELECT RD loans allow the seller to pay the borrowers closing costs and pre paid expenses (taxes and insurance) at closing up to 6% of the sales price.
Other things to know about Select RD…
SELECT RD has up front mortgage insurance mortgage insurance. It’s a 2.25% fee that they will add to the loan amount. This fee goes to the department of Rural Development.
It doesn’t come out of the sellers pocket or the buyers pocket at closing. RD will simply add it to the end of the loan. So, we will actually be financing 102% of the pur-chase price. There is also a small monthly MI charge.
I’ve told you about how the SELECT RD program works.
Now that you know how to use this program to purchase a home with no money out of your pocket.
Here’s what you need to do next…
When you and your family feel you are ready to purchase a home please do the following…
1) Contact our office and ask to be pre-qualified for the SELECT RD program.
2) One you are prequalified, you can go out and begin to look for homes in the area you want to live.
3) Once you find a home you like. Make an offer. Your realtor and our office can help you with this.
4) As part of your offer, negotiate with the seller to pay your closing costs (this is common).
5) Once you and the seller agree to terms – you sign the contract, and get in touch with us right away to get your loan started.
6) Approximately 30 days later you will be able to move into your home!
That’s it!
…not as big of a deal as you might have thought right?
It’s really not!
Happy house hunting!
Brett
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