What’s up with Funding for USDA Loans

While USDA Guaranteed Rural Housing hasn’t received any additional funding for the remainder of 2010 yet, you can still close with a USDA Loan.  USDA has begun issuing Modified Conditional Commitments. So cue up the music, AC/DC “Back in Black” or Aerosmith “Back in the Saddle“.

It’s time to get those USDA Home Loans closed.  If you thought you missed out on buying a new home with USDA Home loan, think again, it’s time to start shopping for your new home.  We are still accepting and Closing USDA Home loans.

These Modified Conditional Commitments come with two caveats:

1. Availability of Funds and the authority to obligate the funds
2. The Authority to charge a sufficient guarantee fee, if any is needed

What does a Modified Commitment Mean to Me the Customer

From a customers standpoint the entire transaction will be the same as before. The conditional commitment issued by USDA are the conditions for them to insure/guarantee the loan, not to approve your loan. So, you can close your loan as normal. However, one Big problem is that when USDA first announced they were running out of funds is that a lot of the investors stopped making USDA loans, and a lot of those left stopped when funds did run out. So far those that have stopped USDA loans have stated they do not plan on re-entering the USDA market until either:

1. The New Fiscal Year and more funds are appropriated, or;
2. The Passage of H.R. 4899, and USDA changing their commitments back to normal

The good news is that we are Still Doing USDA Home Loans. I have to admit there are not a lot of people doing USDA loans with the modified conditional commitments, but we are one of them.

So Why are Some Lenders So Hesitant

So, why are some lenders so reluctant to lend based on these modified conditional commitments?  The Guarantee from USDA is one of the best available to a lender. They basically cover 90% of the loan amount. Meaning if you default the most they could lose is 10%, obviously the numbers are simplified. With the modified Conditional Commitments the lenders have to meet the new conditions more funds, and ability to charge higher guarantee fee before USDA will offer them full protection. Also, USDA will not issue the guarantee if you default on the loan prior to those two additional conditions being satisfied. So, lenders that close USDA Home Loans under these modified commitments are taking on extra risk, and as we all know all lenders have been very risk averse for the past few years.

Give me a call so we can get started on your USDA Home Loan Today.

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Related posts from Indiana's USDA Home Loan Expert:

1. Yes, You Can Get a USDA Loan
2. The Ides of March: USDA Just About Out of Funds
3. The Benefits of a USDA Guaranteed Loan to Purchase
4. Minimum Property Requirements for a USDA Home Loan
5. REO Properties and USDA Loans