Whether you are looking to buy a home or refinance one using a USDA loan, my best advice is to hurry if you can.
The USDA loan program may be running out of money soon and could leave many borrowers in the pasture instead of the farmhouse (sorry, couldn’t resist).
The USDA loan program has become one of the more popular loan programs since FHA got rid of third party down payment assistance programs. The main reason they are popular is because of the true-no-down-payment option, although not having to pay mortgage insurance and still getting low fixed rates are also often common reasons for the USDA loan choice.
In the last few years, it is has become common that the USDA would “run out of money” and then essentially rob the money from some other government program to fund the USDA program through the rest of the fiscal year which ends in September.
But this year may be different.
As usual, the USDA is estimated to run out of funding sometime in April and as usual can only provide an estimate of what it will take to run the rest of the year — $150 million.
But what is different this year is that once the money runs out, there may be no more funding on the way.
Just one of the warning signs is that more than one of the major lenders is no longer funding USDA loans and another sign is that USDA is removing the “subject to receipt of appropriated funds” from their conditional commitments. Simply put, this means that there will be no guarantee that lenders will be able to insure the the loan and fund it.
According to Mortgage News Daily:
Why are they doing this? The money usually runs out around the end of the government’s fiscal year which is September 30th and USDA basically tells everyone we’ll get you’re funding commitments either this year or next. Since the money is running out so early in the fiscal year USDA is not sure where the money will come from therefore will not put “subject to receipt of appropriated funds” on their conditional commitments. Last year the money ran out in March but the stimulus provided the gap funding to carry the program thru to the end of the year but this year there is no stimulus money.
So if you are in the process of getting a home loan and are planning on having the USDA loan program be the loan program you use…
I would move as quickly as possible.
No one knows for certain whether or not the USDA loan program will get funding for the rest of 2010 and you don’t want to be left out in the cold.
Or the pasture.