USDA's Direct (502) Rural Development Loan
I’m just going to cover my experience through The United States Department of Agriculture Rural Development Direct Loan program itself and will not include my emotions through the whole first time homebuyer’s experience. Not only was it a headache, but there was some mishaps I just don’t feel like reliving (all smiles though). The program itself really tested my patience but was more than worth it in the end, and I would recommend it to any first time home buyer that meet the qualifications. Speaking of qualifications, there are only a few: meet income eligibility, decent credit score, proof of income, U.S. citizen or legal alien status with the government, home must be in rural community, and good referrals.
The USDA has two programs which provide aid to those seeking to purchase a home. Direct Loans: Loans offered to homebuyers directly from the Government; Guarantee Loans: USDA backing loans made through customary banking and lending institutions. I applied and received the Direct Loan which I will cover my trials and achievements in this article. If you would like to learn more about the Guarantee Loans you can visit their website: http://www.rd.usda.gov/programs-services/single-family-housing-guaranteed-loan-program. So, being a 28 year old divorced single mom still longing for the two-story home, garage, and white picket fence – I started the USDA Direct Loan journey.
I called my local service center (which was an hour away) and requested to be sent an application. The application itself was annoying, but painless: fill out paper work, provide copies of birth certificates/social security cards/and if applicable driver’s license or other form of photo identification of everyone that will be residing in the home, proof of income, first time homebuyer’s certificate if applicable and letters of good standing (i.e. landlord, parents if you’re living with them, etc.). Mailed in my application (and faxed since I was so nervous), and twiddled my thumbs for 30 . . . 60 . . . 90 days. The 90 day timeframe was caused by my “local” service center handling multiple counties, lack of workers, and my filing at the height of the foreclosure crisis.
Finally, a letter in the mail with an interview date only two weeks away. When the day finally came, I dressed up in my Sunday best, plugged the address in my GPS, filled the Tahoe with overpriced gas and was merrily on my way. I finally made it into town, just for my GPS to get lost “make a legal U-turn, turn right, turn left, destination on right, destination on left” apparently the GPS was just as confused as I was. Made the call to the service center to get the correct directions, and was sitting in front of the caseworker’s desk in no time. The caseworker explained the program to me – just reinterring the details that I (and I’m sure that you) know by heart from all my online research. Everything was going nicely until she told me my credit score – 565. What?!?!!? I went through the home buyer’s program in my county and after clearing ALL my debt I was assured that my score would at least be 600. How devastating – to find out that your credit score is a 565 when you know for a fact that the program requires you to have at least a 650. Tears started to form in the corner of my eyes as she began going over the details of my credit report. I started to see the image of my son’s smiling face running through our backyard begin to fade . . . and then she gave me my approved loan amount. Wait – What?!?! Approval letter – yes, due to my having cleared ALL my debt and not owing anyone anything I was still approved.
I wanted to scream and break into a thank you prayer in the middle of her office – but I didn’t want to freak her out – so I just held my composure. She explained that I was approved for the highest possible loan amount for my county (which I thought there were no limits – but whatever – I was approved), my first payment will be due in July the following year (about 9 months away), the breakdown of my mortgage payments (which was cheaper than my rent), and that I was locked into a fixed low interest rate (the lowest at that time) – but their funds are depleted. What?!!? Apparently, I was approved after the fiscal year ended and they are awaiting approval from the government for funds. Timeframe given – maybe next month or next year. Wow – really didn’t see that coming. I thanked her kindly for all her assistance, got back in the Tahoe, screamed and cried (I know, I know), and then called back all my missed calls and text messages (what did they say?? How much do you have??? When can we move in??). Needless to say it was the most joyous disappointing moment of my life (I still laugh at the thought).
So, in the meantime while I wait for the funding, I get a really great realtor; find that two story home (with two door garage – no white picket fence but that can come later) in a great neighborhood only five minutes from the city, and plenty of room for my son and his friends to play. My approval letter gave me a 30day window to get certain documents (all handled by my much beloved realtor) into the office regarding my pending home – although the funds were not available. Now let me speak of the monetary part she didn’t clue me in on. During the interview she did mention that I will have to pay for a home inspection but there will be no other funds coming out of my pocket. Great – so why do I have to pay for a home inspection, wood destroying organism inspection, appraisal, and earnest deposit? Not that I mind, through my first time home buyer’s program I was advised to save for these types of things – but don’t look me in my face and swear up and down the only thing I would have to pay for is the home inspection. And by the way, all this has come out my pocket and still no word regarding when the funds will be coming and we’re almost at the New Year. Like I said, the USDA was really testing my patience.
A few days after I bring in the New Year with my little one, I get an email headed USDA FUNDS from my caseworker. The funding was approved and the closing was in process. A week later I’m in the title agency conference room (no representative from the USDA there), eating chocolate chip cookies and signing document on top of document. At the end I’m given my keys, garage opener and . . . . a check?? Yes, apparently my earnest deposit was rolled into my loan and therefore refundable by the USDA. And if the sellers weren't going to pay the closing costs (which they did) that would have been rolled into the loan as well, meaning I wouldn't have to go in my pocket to cover closing costs. Only down side is that my mortgage was due next month – not in July as my approval letter said. Money and a new home – on the same day?? I can get over the new due date.
I would have to say there were a lot of behind the scenes work that went on directly between my realtor and caseworker – so I strongly urge anyone buying a home for the first time to team up with a realtor. I cannot give my realtor enough praise – she walked me every step of the way and still keeps in touch (even upgraded my home warranty package out her commission). Is this program time consuming – yes. Will you feel like your application was lost in the shuffle – yes. Will you have to come out of your pocket – yes. Is it worth it – yes! It’s a great feeling to play slide down the stairs in MY home with my 5 year old. Keep patience and your home goal in mind – and you’ll be sliding down your stairs too!!