Dean's Blog

Rural Housing, which authorizes up to 100% financing on home purchases in non-metropolitan areas, is getting closer to having more funds available for home purchases.

This program became wildly popular last year as it was one of only two remaining programs that provided 100% financing for home purchases – the other program is VA which is for military employees. Both programs have the added advantage of having no monthly mortgage insurance.

However, with only limited funds authorized by Congress, all the money was quickly tapped out by April 2010, and new monies are not usually reauthorized until the end of each year.

Bills are circulating around Washington, D.C. to provide new funds for this program, and there must be some pretty high expectations that these bills will be passed - Rural Housing just issued a notice stating they were going to re-start issuing conditional approvals on loan packages.

Since lenders are reimbursed by these congressional funds, most lenders are waiting to close on these loans until the money is made available so they don’t have to tap into their own reserves.

Rural Housing is not a home financing program for everybody. The two most significant restrictions are geographic and income:

• The house must be located outside a metropolitan area – usually where the population is less than 20,000 (in Skagit, Island and Whatcom Counties, all areas are eligible except for Mount Vernon and Bellingham)
• The combined household income must be below a particular threshold

Also, one of the bills is restructuring the Rural Housing program so it becomes self-funding. This would be accomplished by increasing the current funding fee from 2.0% to 3.5%. The funding fee is charged to the borrower, but it’s rolled into the loan amount at closing.

Contact your local, professional mortgage advisor for more information on the Rural Housing Guaranteed program.