USDA, RURAL DEVELOPMENT

1
USDA, RURAL DEVELOPMENT

• HOME BUYER
• EDUCATION CLASS

2
Agenda
I. Why Are You Here? II. Renting vs.
Buying III. Preparing for Home Ownership
A. Up-Front -- Closing Costs B.
On-Going Costs C. Hidden Costs D.
Repayment Ability - Qualifying Ratios
3
Agenda (cont.)
IV. Credit Reports V. Shopping for a Home
A. New Vs. Used B. Selecting a Realtor
or a Builder VI. Home Ownership
Responsibility VII. RD Loans Application
Process
4

• Up Front,
• On Going
• and
• Hidden Costs

5
Up-Front Costs will include

• Down Payment
• Various Closing Costs
• Moving Costs
• Settling in Costs

Budget Movers
6
On-Going and Hidden Costs

• Monthly Mortgage Principal Interest
• Real Estate Taxes
• (1 / 12 per month to Escrow)
• Homeowners Insurance
• (1 / 12 per month to Escrow)

7
On-Going and Hidden Costs

• Maintenance
• (A/C, wiring, plumbing, roof, yard, appliances,
  painting, floor cover, screens, windows, doors,
  driveway, etc.)

8
On-Going and Hidden Costs

• Homeowners
• Association Fee
• (if applicable)
• Utilities - (deposits, monthly payment for use
  electric, water, sewer, telephone, cable, etc.

9
Remember

• AS A HOMEOWNER, YOU ARE NOW RESPONSIBLE FOR ALL
  MAINTENANCE EXPENSES

10
Available Cash and Assets
List all of your sources of cash and
other assets, then decide how much you want to
apply toward up-front housing costs such as the
down payment and closing costs. Remember, you
will want to reserve some of your assets for
financial security. It is not a good idea to
totally deplete your savings to purchase a home.
11
Amount Available for Up-Front Housing Costs
12
Amount Available for Up-Front Housing Costs
13
How You Can Increase Your Borrowing Power!

• Reduce existing debts (charge cards, installment
  loans, etc.)
• Wait until income increases (raises, job changes,
  part-time jobs, etc)
• Put off Big Ticket items (car, furniture,
  vacations)

14
Qualifying Ratio or Housing Expense Ratio
15
Sample Qualifying Ratio

• House Payment (PITI)
• Gross Monthly Income

• PITI plus Existing debt
• Gross Monthly Income

29
41
16
Ten Basic Rules of Money Management

• 1. PLAN - Plan for the future, major purchases
  and periodic expenses.
• 2. SET FINANCIAL GOALS - Determine short, mid and
  long range financial goals

17
Ten Basic Rules of Money Management

• 3. KNOW YOUR FINANCIAL SITUATION - Determine
  monthly living expenses and monthly debt
  payments. Compare out-going to monthly net
  income. Be aware of your total debt.

18
Ten Basic Rules of Money Management

• 4. Develop A Realistic Budget - Follow your
  budget as closely as possible. Evaluate your
  budget. Compare actual expenses with planned
  expenses, this should include MAD MONEY

19
Ten Basic Rules of Money Management

• 5. Dont Allow Expenses to Exceed Income - Avoid
  paying only the minimum on your charge cards.
  Dont charge more every month than you are
  repaying to your creditors.

20
Ten Basic Rules of Money Management

• 6. Save - Save for periodic expenses, such as car
  and home maintenance. Save 5 - 10 of your net
  income. Accumulate 3 to 6 months salary in an
  emergency fund.

21
Ten Basic Rules of Money Management

• 7. Pay Your Bills On Time - Maintain a good
  credit rating. If you are unable to pay your
  bills as agreed, contact your creditors and
  explain your situation. Contact Consumer Credit
  Counseling for professional advice.

22
Ten Basic Rules of Money Management

• 8. Distinguish the Difference Between Wants and
  Needs - Take care of your needs first. Money
  should be spent for wants only after needs have
  been met.

VS
23
Ten Basic Rules of Money Management

• 9. Use Credit Wisely - Use credit for safety,
  convenience, and planned purchases. Determine
  the total you can comfortably afford to purchase
  on credit. Dont allow your credit payments to
  exceed 20 of your net income.

24
Ten Basic Rules of Money Management

• 10. Keep a Record of Daily Expenditures - Be
  aware of where your money is going. Use a
  spending diary to assist you in identifying areas
  where adjustments need to be made.

Spending
Diary
25
Indicators of Unacceptable Credit

• No Credit History
• Payments on any account which was delinquent for
  more than 30 days on two or more occasions within
  a 12 month period
• A foreclosure that has been completed within the
  last 36 months.

26
Indicators of Unacceptable Credit

• An outstanding Internal Revenue Service tax lien
  or any other outstanding tax liens with no
  satisfactory arrangement for payment.

27
Indicators of Unacceptable Credit

• Two or more rent payments paid 30 or more days
  late within the last 2 years.

28
Indicators of Unacceptable Credit

• Outstanding collection accounts with a record of
  irregular payments with no satisfactory
  arrangements for repayment, or collection
  accounts that were paid in full within the last 6
  months, unless the applicant had been making
  regular payments previously.

29
Indicators of Unacceptable Credit

• Non-Agency debts written off within the last 36
  months, unless the debt was paid in full at least
  12 months ago.

PAID IN FULL
30
Indicators of Unacceptable Credit

• Agency debts that were debt settled within the
  past 36 months, or are being considered for debt
  settlement.
• Delinquency on Federal debt.

31
Indicators of Unacceptable Credit

• A court-created or court-affirmed obligation or
  judgment caused by nonpayment that is currently
  outstanding or has been outstanding within the
  last 12 months, except

32
Indicators of Unacceptable Credit

• A bankruptcy in which
• Debts were discharged more than 36 months prior
  to the date of application or

33
Indicators of Unacceptable Credit

• Where an applicant successfully completed a
  bankruptcy debt restructuring plan and has
  demonstrated a willingness to meet obligations
  when due for the 12 months prior to the date of
  application.

34
Indicators of Unacceptable Credit

• A judgment satisfied more than 12 months before
  the date of application.

35
Indicators of Unacceptable Credit
An applicant with an outstanding judgment
obtained by the United States in a Federal
court, other than the United States Tax
Court, is not eligible for a Section 502
loan. This requirement is statutory and cannot
be waived.
36
Shopping for a Home?

• The following questions should serve as a partial
  checklist for the prospective home buyer

37
Outside the Home

• Are adequate shopping facilities close by?
• Are Churches available and convenient
• Is the community well planned?
• Are police and fire protection adequate

38
Outside the Home

• Are schools located to suit you?
• Is a hospital or medical center nearby?
• Are recreational facilities nearby?
• Are trash and garbage disposal arrangements
  adequate or frequent enough?

39
Outside the Home

• Are there adequate parking spaces or garage
  facilities for your needs?
• Is public transportation adequate and handy?
• Is there a reliable and drinkable source of
  water with adequate pressure?

40
Outside the Home

• Is the sanitary sewage disposal system reliable
  and adequate?
• What is the view out the front door? Are there
  eyesores? Do the neighbors appear to take good
  care of their properties?

41
Outside the Home

• What is the traffic like on neighborhood streets?
  A street empty of cars on Sunday afternoon may
  be clogged with traffic on weekday rush hours.
  If the streets are busy, are there sidewalks?

42
Outside the Home

• Is the land well drained?
• Are lots or units arranged to suit your family
  lifestyle?
• Has proper landscaping been done to prevent
  erosion?

43
Inside the Home

• Do walls seem sound and smooth, floors firm and
  level, carpentry well fitted and joined?
• Is lighting good during both day and night?

44
Inside the Home

• Are rooms large enough to accommodate your
  furniture and is there sufficient wall space for
  arranging furniture?

45
Inside the Home

• Does the kitchen have good lighting and
  ventilation? Are there enough outlets for
  plugging in all your kitchen appliances?
• Are there ample cabinets and counter work space
  for your family needs?

46
Inside the Home

• Do doors, windows and drawers work easily and
  safely?
• Does plumbing work smoothly and quietly with
  adequate water pressure and free-flowing drains?

47
Inside the Home

• Is heating and cooling and ventilating equipment
  satisfactory?
• Are there enough electrical outlets well arranged
  and sufficient amperage for your electrical
  equipment?

48
Inside the Home

• Are temperature controls located in safe and
  convenient places?

49
RURAL DEVELOPMENT LOANS

• All homes must be located in a rural area

50
502 Guaranteed Loans

• 30 year fixed rate. Not subsidized. Low to
  Moderate income group. Can be either new
  construction or existing home. Applicants
  should meet qualifying ratios of 29 PITI and 41
  MOTI. May qualify for SHIP down payment
  assistance as needed. Apply directly with
  lender. All applicants eligible for guaranteed
  loan who apply directly with Rural Development
  will be referred to a lender.

51
502 Direct Loans All direct loan programs

• Apply directly with Rural Development
• 33 year term
• Fixed interest rate
• Qualifying ratios for low income
• 33 PITI 41 MOTI
• Qualifying ratios for very low income
• 29 PITI 41 MOTI

• All applicants will be reviewed for participation
  with a local lender.
• All applicants will be considered for SHIP down
  payment assistance as needed.
• Must have good credit.

52
502 New Construction

• May use any licensed contractor.
• Rural Development does maintain a list of
  participating contractors.
• All new construction loans carry a one year
  builders warranty

53
502 Existing Home

• No Warranty
• Home must meet the HUD Handbook Guidelines

54
502 REO PROPERTY

• An existing home which Rural Development has
  taken back through foreclosure.

55
502 Assumption/Transfer

• An existing Rural Development borrower who wishes
  to sell their home.
• No Warranty
• All homes must be in condition to meet HUD
  Handbook Guidelines

56
QUESTIONS?

• RURAL DEVELOPMENT
• 863-533-2051 EXT. 4
• http//www.rurdev.usda.gov/fl