USDA loans have become a popular option to finance a home (when the property qualifies) because with a USDA loan, there is no mortgage insurance and no down payment requirement.
Yes, you read that right – you can still get 100% financing when you finance an eligible property with a USDA loan.
It seems that pretty much every year at about this time, the USDA “runs out of money” and there is at least some uncertainty as to whether or not the program will have funding to continue on through the rest of the year.
According to the best estimates, The USDA Section 502 guaranteed Rural Housing Program will run out of the money that has been allocated to it sometime in April. And it is estimated that they will need about 150 million in funding to fund the volume of loans estimated that people will apply for for the rest of the fiscal 2010 (fiscal 2010 runs out in September).
And if they really run out of money this year, it could be different than past years — there may be no more funding coming.
In past years USDA has appropriated funds from other areas to make up for the shortfall in funding dollars giving lenders the oppurtunity to continue to fund USDA loans.
One warning sign that there may not be any more funding coming 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.
What does this mean if you are thinking of financing your home with a USDA loan?
It means hurry.
There is no telling whether or not the program will have funding – and you may end up left in the pasture rather than the farmhouse.
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