Kevin & Maryellen Garasky (KMG Mortgage Group - ID & WA)

With the tightening of lender guidelines and the shrinking of pocketbooks across America, USDA is growing in popularity among middle to low-income families and individuals. However, very few Mortgage Professionals know how valuable this program is and, even more importantly, don't know how to structure the loan for a fast and smooth review.

Because program literature and copy written material often provides "Program Highlights" and don't get into the nitty-gritty, I called my local USDA contact and asked for a copy of the underwriting guidelines. He was happy to oblige, and I have (while trying to be more in depth than program fliers and handouts, but not dictate the underwriting guidelines - 24 pages of SMALL font that will bore you to tears) provided you with information I think you will find valuable.

Availability
USDA loans are not available in all areas. CLICK HERE to see if they are available where you are.

Term
30 year amortization, fixed rate = no exceptions. Primary residences only.

Interest Rate
Schedule provided by investors. Limited to Fannie Mae 90-day yield for 30 yr conventional fixed rate loans (plus 0.6% or 60 bps) or the lender's posted VA rate with no discount - whichever is HIGHER.

Mortgage Insurance
None - 2% guarantee fee (see below)

Guarantee Fee
2% - the maximum loan-to-value for purchase loans can exceed the appraised value to include the amount of the guarantee fee. This applies only to loans for which the guarantee fee is being financed.

Loan Purposes

• Existing or new homes, modular, manufactured (only new units), townhomes, condos. If the townhome or condo has a PUD, it is automatically acceptable for the program.
• Take out/end loan including construction-to-perm.
• Property repairs/improvements - must be completed before the final guarantee is issued.
• All typical buyer closing costs, including the one time RD guarantee fee.

Minimum or Maximum loan amount
None

Payment Shock
Do not allow additional risk layering with very strong documented compensating factors when the new PITI is double or more than their existing housing expense, or where there is no history of housing expense.

Credit Criteria

• No foreclosure in past 36 months.
• No bankruptcy discharged within 36 months.
• No more than one-payment 30 days past due in last 12 months.
• No accounts converted to collections within past 12 months.
• No tax liens or delinquent government debts (including student loans).
• No judgments outstanding in past 12 months.
• No outstanding collections.
• No two or more late rent payments within 24 months.
• No debts written off or charged off within the past 36 months.
• Chapter 13 Bankruptcies will be handled on a case-by-case basis.

Exceptions to Credit Requirements

• The circumstances were of a temporary nature, were beyond the applicant's control and have been removed.
• The adverse action or delinquency was the result of a justifiable dispute because of defective goods or services.

Streamlined Underwriting and Additional Compensating Factors
Primary wage earning is 660 or above AND co-applicant (if any) is 620 or above:

• Payment Shock - may use credit scores with no further documentation
• Ratio/Credit Waiver - may use credit scores with no further documentation
• Rental History - may use credit scores with no further documentation
• Non-Federal Outstanding Collection accounts - may use credit scores with no further documentation

Credit scores between 620 and 659

• Credit scores CANNOT be used as compensating factor.
• Adverse credit must be addressed and documented with compensating factors other than credit scores alone.

Credit scores under 620

• Requires full underwriting analysis.

Non-traditional Credit
Allowed

Debt-to-Income
29% front/ 41% back

Income Limits
The adjusted gross annual household income must not exceed the limits posted for your state. However, I have included the income limitations for Idaho as an example to you. The numbers below are for all counties in Idaho except Blaine County:

1 person - $49,550
2 person - $56,600
3 person - $63,700
4 person - $70,750
5 person - $76,400
6 person - $82,050
7 person - $87,750
8 person - $93,400 *revised 3/19/2008

Homebuyer education
Required for first time homebuyers

I hope you have found this to be helpful. If you wish to get a copy of the comprehensive guidelines, please visit the USDA website.

Happy originating!

This is an earlier post of mine, but I wanted to re-post because this important event is just around the corner.

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Help Feed Coeur d'Alene's Hungry!

The United Way will be teaming up with Coeur d'Alene food assistant charity organization "Community Roots" to get fresh produce to those who need it most in our community.

The Day of Caring is Wednesday, Sept 17th.

Starting off at 8am with breakfast at the Coeur d'Alene library, then volunteer teams and project teams connect and head off for the days activities.

Your day will be spent outside picking fruit trees (plums, apples and pears), weighing them, charting them, and then delivering them to numerous food assistance facilities that "Community Roots" has partnered with. The days activities should wrap up around 2pm and you will be free to return to your day's activities.

Anyone located in or around Coeur d'Alene who is interested in forming a team of 3-4 people, please reply to this blog and I'll be in touch!

To learn more about "Community Roots"
CLICK HERE

As you may already know, North Idaho (Coeur d'Alene specifically) is an amazing place to be. That's why some of you have already decided to make it your home and/or business location. That's why thousands of people vacation here every year!

My husband has been a lifelong resident (he remembers when "The Resort" was "The Cloud Nine" and the only stop light in town was at 95 & Kathleen) - WOW! How far we have come! I consider myself a "native by marriage" - and wouldn't want to be anywhere else!

Click on the attached link to the "USA Today" article Life on Vacation: Dive in to Divine Weather in Idaho, and learn why so many people are making North Idaho and Coeur d'Alene their second home destination!

And, when you're finished, learn more about KMG Mortgage Group - North Idaho's leading mortgage broker for your perfect 2nd home loan!

And for those who already live here, enjoy the confirmation that we live in the best town in America! Of course, I'm biased!

Enjoy!

Changing Jobs Before Your Loan Closes?

We had a borrower call us today and ask an excellent question that I thought you all could benefit from.

Q: Is it okay if I change jobs before my loans closes? I will have the same position, same title, and same responsibilities.

A: Historically speaking, this kind of change would be of less concern than others. However, as we have all seen on the news, and in my blog post yesterday titled "Feds Take Over: Are We Just a Dog Chasing Its Tail?", things are a-changing. We are seeing underwriting demands that, if it were this same time last year, would have sent us away scratching our heads.

Our recommendation to our customer? Let us talk to our underwriters BEFORE you make any changes.

And, that's the benefit of having your loan through a mortgage broker and NOT a direct lender or bank. What might bother one underwriter, might not bother another. Direct lenders and banks, typically, have only ONE underwriter on staff. Mortgage Brokers are only limited to the number of underwriters they have by the number of lenders they are approved to do business with. In KMG Mortgage Group's case, that's over 40.

So, don't take your chance with just one underwriter. Use KMG Mortgage Group and have over 40 underwriters at your disposal!

Apply on-line today at www.kmgmortgagegroup.com!

Maybe you've seen the news: as of today the
Federal Government is in charge of Fannie Mae and Freddie Mac.

What prompted the Feds to step in? Fannie and Freddie, which together own or guarantee about $5 trillion in home loans, about half the nation's total, have lost $14 billion in the last year and are likely to pile up billions more in losses until the housing market begins to recover.

Is this a good thing? Depends on your perspective... Many are claiming that the move was necessary in order to bring stability to the market-place. Others are saying that what is happening in our housing and lending markets is a necessary "correction" and should be left to come to its own, natural conclusion.

What do these perspectives have in common? Though analysts may disagree whether this is a necessary move or just another political game in an election year, they do agree that whether the Feds stepped in, or by allowing this "correction" to ride, is of little consequence to the endless Americans who have lost their homes due to lax underwriting guidelines and plunging home values.

What is the hope of the new Federal Housing Finance Agency (FHFA) - the new Governmental body now in charge of Fannie and Freddie?

• That it will significantly lower the borrowing costs for the agencies, thus improving interest rates immediately. In fact, upon coming into the office Monday morning, Mortgage Brokers everywhere were pleasantly surprised to see rates did, in fact, take a nose dive.
  
  
• Agency Mortgage Backed Securities (MBS) will resume trading in sympathy with Treasuries. It is hoped that the margins between T-bills and Agency MBS will narrow now that the government is in full control, thus improving rates even further.
  
  
• It is, also, hoped that this move will give the Feds a new tool to kick start a slowing economy, or put the breaks on an economy moving too swiftly with threatening inflation. If the Feds view rates as too low, they will sell Agency MBS. If rates are too high, they will be active buyers of these securities.

Think of it as a dog chasing its tail. If it runs too fast, it will spiral out of control, get dizzy and end up on the floor. If it moves at a glacial pace, it won't ever get the chance to have that victorious feeling of having caught the prize (in this case, its tail).

It's an elementary example, but I think you get the point.

How much will this cost? Analysts were split on how much the takeover could eventually cost taxpayers - although all agreed the up-front costs will be substantial, possibly hitting $100 billion as the Treasury is called upon to bolster the capital cushions at both institutions.

Is there an end is sight? If the plan does the trick of stabilizing the housing market and home prices stop falling and rebound, then the assets of both Fannie and Freddie should rise in value and the government should be able to sell off the companies and recoup its investments.

Is this permanent? Will Fannie and Freddie ever be able to run on their own again? No. It would be up to Congress and the next president to figure out the two companies' ultimate structure and the conflicting goals they operated under, but suffice to say, Fannie and Freddie, as we once knew them, are gone.

One thing is for sure, don't expect underwriting guidelines to ease anytime in the foreseeable future.

Stay tuned for more...