Ok, so I’m having a conversation with a Loan Officer for another mortgage company yesterday and I get this idea that maybe I should help our community by providing a better understanding regarding some of the “do’s and dont's" surrounding the USDA Rural Development Loan.
During this phone conversation, I quickly realized that the scenario provided was based on a misunderstanding of the difference between DIRECT versus GUARANTEED Income limits. DIRECT USDA Loans are loans that are entirely underwritten directly at the local USDA office, similar to going to the DMV in terms of service. The DIRECT USDA Loans are generally reserved for very low income borrowers. GUARANTEED USDA loans are typically underwritten by direct lenders with a “second look”/underwriting review from the local USDA service center. That’s the abbreviated explanation between DIRECT versus GUARANTEED USDA Loans. There’s more to it, but an entirely different discussion…
The USDA Guaranteed Rural Housing (GRH) Program offers greater flexibility for your clients in terms of income limits. The new 2009 income limits for the USDA Guaranteed Rural Housing (GRH) Program offers an easy to understand 2 tier system. The 1st tier provides an income limit for household sizes of 1-4 persons and the 2nd tier provides an income limit for household sizes of 5-8 persons.
Here are the Base Income Limits for all non-high cost counties:
1-4 Person 5-8 Person
$73,600 $97,150
So, regardless of whether we have a buyer purchasing a home in a high-cost (metro areas) or non-high cost county (“the sticks”), the benefit here is that all 1-4 person households would qualify based on the 4 person limit and all 5-8 person households would qualify based on the 8 person limit.
Wait a minute, it gets better…
For those serving markets located within high-cost counties of Georgia, such as Coweta, Spalding, Fulton, Carroll, Heard, Henry and even Pike County, to name a few, we have the Maximum Adjusted Income Limits. Because those counties mentioned are considered part of the Atlanta-Sandy Springs-Marietta Metropolitan Statistical Area, the income limits are increased to allow for the higher cost of living. A Metropolitan Statistical Area (MSA) is generally a county or group of counties with a combined population of at least 50,000. In addition, adjacent counties are included in a metro area according to commuting patterns.
The Maximum Adjusted Income Limits for counties included in the Atlanta-Sandy Springs-Marietta Metropolitan Statistical Area (high-cost counties) are…
1-4 Person 5-8 Person
$82,450 $108,850
So, depending on the buyer’s debt ratios, with those income limits you can buy a lot of home in Metro Atlanta!
Knowing that most of us are control freaks, I’m sure many may assume that everything is dead if your buyer’s annual income exceeds the maximum income limits. However, there are a few ways to help those whose annual income may exceed the maximum limits. For example, for each resident of the household that is under 18 Years Old, Disabled or a Full Time Student, there is a $480 deduction to the annual income. In addition, the program allows for adjustments regarding various child care expenses. The most important factor regarding whether or not your buyer qualifies is that you should not assume anything and rely on the experts. By allowing the loan officer to “spend some quality time” with your buyer, you are increasing your odds of a much smoother transaction.
Also, unlike other home loan programs, there are no loan limits with the USDA Guaranteed Rural Housing (GRH) Program. Please share this information with your fellow Realtors and Builders!
Hope this helps…
