USDA Guaranteed Rural Housing (GRH) Loans

1. USDA Guaranteed Rural Housing (GRH) Loans

2. We’re NOT the meat inspectors, but they are a sister agency in USDA (pages 3 – 4) Who is USDA?

3. We are Rural Development!

4. GRH – The Essentials • Properties MUST be located in a rural area • Maximum Total Household Income limits apply • Applicant(s) must have acceptable credit and stable employment histories • Owner-occupied only • 29% / 41% ratios*** • No mortgage insurance • 30 year, fixed rate mortgage • 2% fee on purchases; .5% fee on USDA refinance** • NO in-ground pools or existing manufactured units • Loans may be up to 102% of the appraised value** • 2-day turn-around time from Rural Development (page 5)

5. GRH – The Essentials # 1Location is everything! Please check property address at: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do Dwellings MUST be in a rural area. (page 6)

6. Old maps

7. New maps (page 7) http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.doClick here for property eligibility

8. If you have a complete address including the zip code enter it here Just browsing in a county? Click on “South Carolina & then click on the county (page 7)

10. 19 counties in SC contain ineligible areas Aiken Anderson Beaufort Berkeley Charleston Darlington Dorchester Florence Georgetown Greenville Greenwood Horry Lexington Orangeburg Pickens Richland Spartanburg Sumter York If the property is located in one of these counties, please check the mapping website for location eligibility. (page 9)

11. # 2 CalculateTOTAL Household Income! This can be completed on the website: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do OR, use the worksheet in the program guide. TOTAL household income MUST be below maximum limit for program eligibility! (page 10)

12. http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.doClick here for income eligibility

16. Search out DEDUCTIONS! Dependents: $480 each • Children 18 yrs. or younger • Disabled household members 18 yrs. or older • Full time students 18 yrs. or older Verified day care expense • of minor children 12 yrs. or younger that enable the employment of a household member Elderly family: $400 • 62 yrs. of age or older, disabled, or surviving spouse of deceased elderly client Medical expenses not to exceed 3% of gross income (pages 11 - 12)

17. Eligible income is the TOTAL household income. Qualifying/Repayment income is the income of the person(s) signing the Promissory Note. **Eligible Income and Qualifying/Repayment income MAY be different figures. (page 13)

18. Include ALL income within the household for eligibility • Seasonal/Overtime/Bonus income may be averaged based on verified history • Non taxable income may be grossed up (child support/SSI) • Pending pay increases may be used as a compensating factor • Document income calculations for quick turn around • If RD can see how you calculated the income it’s much quicker! (page 13)

19. VOE’s • WRITTEN VOE &one recent paystub with YTD earning figure OR • PHONE verification & 2 years W-2’s& 30 days of paystubs with YTD earning figure • Refer to AN 4179 (pages 14 – 15)

20. ?? Self-Employed?? • Refer to AN 4367 • 2 years tax returns • Fannie 1084 “Cash flow analysis” • Fannie 1088 “Comparative income analysis” • Document calculations

21. #3 Environmental Review & Reservation of Funds • Please submit both of these as soon as you determine the loan will be processed as a USDA Guarantee. There is no cost for the environmental review. • Fax the reservation of funds form & environmental request to the appropriate GRH processing office. • Must be completed before Rural Development can approve the loan. • Wetlands and flood plains (new construction) should be avoided. (pages 16 – 18)

22. #4 Dwelling Suitability Existing dwellings must meet the HUD handbooks 4150.2 and 4905.1 as well as USDA requirements. We recommend using a FHA roster appraiser to satisfy the inspection requirements. If not, a home inspection must be completed. Water test is required if property is served by an individual well. Septic inspection needed if appraiser notes any problem. Repairs may be rolled into the loan, escrowed, and completed after loaning.** Properties with in-ground pools are not acceptable. ( pages 19 – 25)   

23. Manufactured housing units are allowed IF brand new (never titled) and purchased/installed through a dealer-contractor approved by USDA. • Condos may be allowed if approved or accepted by HUD, VA, Fannie Mae or Freddie Mac. • Townhouses and modular units are allowed. • New construction – obtain from the builder: building permit, certificate of occupancy, warranty, evidence of termite treatment and form AD-1048. (pages 19 – 25)

24. #5 Credit & Underwriting • GRH fee is 2% and may be included in the loan over the appraised value. .5% for USDA refinances • Ratios are 29% and 41%. Waivers allowed with compensating factors. • 620 is a magic credit score number! Less documentation required. • MAXIMUM interest rate guidelines at the date of lock or if a float to close, date of close: Fannie 90 day delivery plus 60 basis points, rounded up to the nearest one-quarter of a point. ORAdvertised VA rate with no discount points • Up to 102% of the APPRAISED VALUE; if the GRH fee is included in the loan. Calculating the MAXIMUM loan amount:Appraised Value (AV) / .98 (pages 26 – 28)

25. Minimum credit score: AN 4346 • Underwriters MAY reject files • Non traditional credit histories accepted • Verification of Rent required on all files below 620 credit score. If above 620, provide housing expense on application/transmittal • Collection accounts: AN 4366 • Document credit waivers/ratio waiver requests along with compensating factors on the 1008, Underwriting Transmittal Summary (pages 26 – 28)

26. Ratio Waivers -- This is our call! Include a written Request for Ratio Waivers providing compensating factors • New PITI lower than Rent • Credit Score (660+) • Conservative use of credit • Cash Reserves • Stable job history (2+yrs.) • Line of work will see increased earnings • AN 4366 • 31/43 ratios for energy efficient homes (pages 26 – 28)

27. AN 4200: Non-U.S. Citizen Eligibility SAVE: Systematic Alien Verification for Entitlements

28. #6 Forms • 1980-21: Request for SFH loan guarantee Original signatures are NO longer necessary, faxes or photocopies are accepted. (pages 29 – 34) USE 1980-21 REVISION 6/06

30. THE APPROVED LENDER WILL SIGN HERE By signing here you are acknowledging that you did underwrite the file. The borrower(s) will each sign here. FAX OR PHOTOCOPIES OF SIGNATURES ARE NOW ACCEPTED!

31. #7 Refinancing • GRH fee is 0.5% and may be included in the loan over the appraised value. • Only USDA loan refinances are eligible (GRH or Direct) • 30-year fixed rate loan • Funded buydowns are not allowed • No “cash out” option • No property inspections or environmental review necessary • Recapture on Direct loans may be included or subordinated. (page 35)

32. File Flow • Lender interviews applicant • Lender processes and submits loan to underwriting • Lender submits approvedunderwritten file to Rural Development • Rural Development issues conditional commitment in 24-48 hours • Loan closes • Lender submits closing package to Rural Development • Rural Development issues Loan Note Guarantee (pages 36 – 37)

33. What’s in It for You? • Usual and customary origination fees • Interest received from the loan • Yield Spread/Service Release Premiums • Increased customer base • Referrals from satisfied customers • GRH loans help meet CRA requirements (page 38)

34. What’s in It for the Applicant? • No required down payment • No up-front or monthly mortgage insurance • Loan amount of up to 102% of the appraised value • Lower monthly payments (page 38)

35. Important Websites Visit often!! Rural area and income eligibility: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do ANs, Regulations, & Forms www.rurdev.usda.gov/regs Guaranteed Housing: www.rurdev.usda.gov/rhs/sfh/GSFH_Information/GSFH_Specific.htm Investment Properties www.resales.usda.gov USDARural Development www.sc.egov.usda.gov www.rurdev.usda.gov www.usda.gov (pages 39 – 47)

36. Brenda Holland (864) 814-2471, Ext. 128 (GRH processing for the upstate) Sue T. Wren (803) 649-4221, ext. 126 (GRH processing for Aiken and Midlands) Loretta G. Friday (803) 905-7650, ext. 116 (GRH processing for the Pee Dee) Eva L. Franklin (803) 765-5884 (GRH processing for the Low country) www.sc.egov.usda.gov www.rurdev.usda.gov USDA is an equal opportunity provider, employer, and lender. To file a complaint of discrimination write USDA, Director, Office of Civil Rights, 1400 Independence Avenue, S.W., Washington, D.C., 20250-9410 or call (800) 795-3272 (voice) or (202) 720-6382 (TDD).

37. Approved Lenders Appendix II contains a list of the Nationally approved lenders, state approved lenders, and information on becoming an approved lender. (pages 49 – 62)

38. QUESTIONS