USDA Running Out of Funds As of 06/10/2010 - USDA now has funds available. For more info go to : USDA Has Funds
It is well known that USDA is running out of money in May 2010. However, one should consider the consequences to the depletion. USDA has informed us that they are now leaning on $24 million dollars. When considering how much the program has gained in popularity, this amount will not go very far, if at all last until May.
There is some cause for concern, however knowledge is king and it is not the problem rather the solution we must focus on.
FHA is raising the Upfront Mortgage Insurance Premium from 1.75% to 2.25%. Although this doesn't necessarily affect the qualifcation, it is indicative that the industry is gauging their previous losses with a magnifying glass. On another change, FHA has announced that come early summer, the maximum seller contribution will become 3% compared to the current 6%. This means buyers will need to not only bring in their 3.5% required down payment but also another 1-3% depending on the loan amount and the hard costs associated with it. This may very well lock out buyers who cannot come up with 5-6%, especially in these hard times.
Another thing to consider are the homes under contract that are depending on USDA financing. What happens to those sellers and buyers if they fail to secure the necessary USDA financing? How many of those borrowers have sufficient funds to initiate a Plan B (Placing 3.5% as a down payment)?
This information is not to be alarmist rather inform both professional and consumer that they will need to weigh their options and form a Plan B in the event these changes and future changes affect the outcome of finalizing the purchase of a home.
One tip is to seek a lender that is known for closing quickly and try to lock in either an FHA Case Number before April 5th or underwrite the USDA loan quickly and solidify what is known as USDA's Final Commitment. A company that can offer a Ten Day Close and that has their own underwriting and funding under one roof.
Sr. Mortgage Consultant
Academy Mortgage - Mesa, AZ