Citizens Mortgage Company - Rural Development Home Loan

WHAT IS A RURAL DEVELOPMENT LOAN?
The Rural Development program was developed to help medium income families obtain a home in rural areas with reasonable costs. There is no down paymetn required on these loans. This program no longer has a maximum loan limit. The only limitation is the medium income set forth by the RD guidelines.
These loans will be made on a fixed rate basis only and with a loan term of 30 years. There is no prepayment penalty on these loans.

THIS IS NOT FIRST TIME HOME BUYER MONEY

It is permissible for the purchases to have owned a previous home. If the paplicants own a home currently and do not plan to sell it, the home must be located out of their current commuting area or it must be inadequate for their family.

The land value of the peoperty may not exceed 30% of the toal appraised value of the peoperty or the sales price (the lesser of the two). The loan is not designed for large acre tracts.

This is a SINGLE FAMILY residence type loan. No duplex, triplex or four-plexes will be allowed.

These loans are for families with medium income. Thi s is not a low0income program and the purchasers are expected to qualify on their own with ratios of 29% (for the toal house payment including taxes and homeowners insurance( and 41%, no tolerance for any greater (for total house payment and all other monthly obligations could include but not limited to, revolving charge accounts, installment charge accounts, child support payable, car payments, etc....

If the home is new, it must have been built according to pre-approved specific specs and plans. We must have a copy of the specs and plans with an engineer's seal and the following statement next to the engineers seal;
"I DO HERBY CERTIFY THAT THESE DRAWINGS/PLANS AND RELATED SPECIFICATIONS MEET ALL LOCAL CODE AND REQUIREMENTS AND ARE IN SUBSTANTIAL CONFORMITY WITH RURAL DEVELOPMENT MINIMUM PROPERTY REQUIREMENTS."

An appraisal will be ordered off of them plus 3 inspections. One before footings are poured, two before drywall goes up and the third is the final. If the home is pre0owned or over 1 year old it will fit into the program. Older homes also fit ito the program. ALL HOMES MUST PASS A HEATING, ELECTRICAL, PLUMBING AND THERMAL INSPECTION. A qualified inspector should do this inspection.
HOMES ON SHARED WELLS AND PRIVATE ROADS WILL BE ACCEPTED AS LONG AS THERE IS A RECORDED MAINTENANCE AGREEMENT.
IF THE HOME HAS A SEPTIC/LAGOON OR WELL IT WILL BE NECESSARY TO HAVE A HEALTH AUTHORITY INSPECTION TO SHOW IT HAS AN APPROVED WELL, AND A PROPERLY WORKING SEPTIC/LAGOON.

Top Four Reasons for Rejected Files

#1 Derogatory Credit:
Rural Development Loans Require excellent credit
with no more than one slow pay of 3-days late.

#2 INSTABIILITY OF INCOME:

#4 LIQUID ASSETS:
Documenting acceptable funds for closing.

DEROGATORY CREDIT
Items considered when reviewing a credit report:
Derogatory credit within the last 12-24 months.
Collection accounts paid off to qualify
Poor credit in past without re-establishing new credit.
Derogatory credit after a banruptcy needs to be discharged 3 years.
Judgment must be paid in full, including any tax liens.
No credit history requires rent verifications and utility bills to establish credit.
Remember that a co-signer does not off-set bad credit.

RATIOS THAT EXCEED THE GUIDELINES
Insufficient income may cause ratios to exceed the guidelines.

Insufficient Income:
Full-time does not always mean 40 hours per week
Unreinbursed business expenses will cause income to be less (on any sales or commissioned employee you should plan on checking for business expenses on their tax returns)
Rental income is almost always showing a break or even or loss on tax returns. (Guidelines require tax returns to be provided on anyone with rental property) Therefore, if a buyer tells you they get $600.00 per month in rental income - REMEMBER that this is probably before deductions of their own payment on the home and wriring off the maintenance. In some cases, the payment can be washed out by the rental income.
Child support received or Note income must be verifiable and last at least the next three (3) years.

INSTABILITY OF INCOME:
ITEMS CONSIDERED WHEN REVIEWING EMPLOYMENT
Three or more job changes in a two year time frame thows a red flag unless the purchaser is a union worker or in the carpentry field. Fields of employment must be related and the change must be for the better.
Seasonal or temporary employment of job stability. Seasonal workers' income must be averaged.
Part-time income, bonuses and overtime must be verifiable over the past two years.
Never go off W-2 income for qualifiying: some of the W-3 income may not be able to be counted and/or borrower may make more money now.
A change in careers may require a year on the job for Rural Development type loans
Self-employed or commissioned employees must have beenin the same line of work for at least one full year if the job relates to the previous job or have two years tax returns.
If borrower has new job with probation period, loans can be approved BUT not closed until probation period has expired (i.e., including but not limited to state or federal employment)

Excessive Debt:
Buyers most always forget a few debts when going over obligations: payroll deduction loans, allotments, 401K loans, gas cards, child suport and mutual funds just to name a few.
Monthly requirement debts are sometimes higher than estimated by the buyer (We at Citizens Mortgage Company will run a credit report to check the monthly payments while you are at our office)
If our borrower has co-signed on loans the dbt must be over 12 months old (with proof the other party is making the payment), in order to not count against them when qualifiying.
Co-signers must be able to produce 12 months canceled checks showing payed on time in order not to count as an obligation.
In order not to count an obligation you must have the following:
Installment loans must not last over 6 months and compared to the individuals monthly income. It is determined on a case by case basis.
All revolving debt is counted whether it is under 10 months or not.
If the ratios exceed the guidelines look at a fixed rate buy-down or an adjustable rate mortgage.
If using a co-signer the main borrower's ratios must still be 37/43 on their own.
No co-signers are allowed on Rural Development Loans.

Ratios:
Rural Development: 29%/41%

R.D. INSULATION REQUIRMENTS
If the home has a crawl space the floor should have R19 insulation. If the home has at least R11 we can ask for a variance of the requirmeent. If there is no insulation, it must be added to the R19 level.

The outside walls of the home are required to have R19 also. If they have at least R11 we can ask for a variance of the requirement.

The attic should have at least an R32 insulation rating. If it has less than an R32 rating it will have to be built up to R32.

Dwellings financed shall meet the standards outlined above except for an existing dwelling if documentation is provided to establish that the actual cost of heating and cooling is not significantly greater than those costs for a dwelling that meets RD's thermal standards. If the dwelling is excepted, only the perimeter of the house at the band beam and the heat ducts in heated basements must be insulated.

Any dwelling financed with a RD guarantee must be structurally sound, functionaly adequate, and placed in good repair prior to issuance of approval.
3'5" of insulation = R11
6: of insulation = R19
10" of insulation = R32
12" of insulation = R38

RURAL DEVELOPMENT INCOME LIMITS
As of 03/19/08

1 Person Household

$49,950.00

2 Person Household

$56,600.00

3 Person Household

$63,700.00

4 Person Household

$70,750.00

5 Person Household

$76,400.00

6 Person Household

$82,050.00

7 Person Household

$87,750.00

8 Person Household

$93,400.00

1 Person Household	$49,950.00
2 Person Household	$56,600.00
3 Person Household	$63,700.00
4 Person Household	$70,750.00
5 Person Household	$76,400.00
6 Person Household	$82,050.00
7 Person Household	$87,750.00
8 Person Household	$93,400.00