Tucson AZ Home Loan Info

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Change Coming for USDA Loan Approvals

There is a mandate coming down soon from the United States Department of Agriculture in regard to their Rural Development loans. 

USDA loan approvals (whether direct or guaranteed) will require that the borrower meet the 29/41 debt ratios in order for the loan to be approved.  There will be no exceptions.

The reason?  USDA is 100% financing, and the default rate on these loans is increasing.  People with higher debt ratios that 29/41 are by far the greatest percentage of these defaults.

 ___________________

I'm Mike in Tucson, and I blog here on the Active Rain Real Estate Network just about every day.

I'm an internet based mortgage lender who happens to reside in Tucson, Arizona.  Read my blog, and get to know me.  The internet allows me to perform at the highest level of trust and productivity for clients anywhere in the world.  At the moment, we're completing purchase loans in less than 30 days for US Citizens in Iraq and Afghanistan.

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Mike Jones (Tucson Mortgage Company, LLC): Loan Officer in Tucson, Pima County, Arizona
SUNSTREET MORTGAGE, LLC
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Comment balloon 15 commentsMike Jones • October 23 2009 11:11AM

Comments

Mike, Where did you hear that? and what is the date it kicks in?  USDA's GUS system almost always allows over 41, Heck up to 55 seems fairly easy in many cases for a clean deal. I spoke with one of the higher up guys at USDA in NJ just a few months ago and there was no mention of the change.

Posted by Robert Rauf (HomeBridge Financial Services (NJ)) over 9 years ago

Hi Mike~  The other day I read on here that VA loans have the least amount of default.  Now I am learning that these loans have a high amount of default.  I guess it makes sense that it is linked to the debt ratios.

Posted by Vickie McCartney, Broker, Real Estate Agent Owensboro KY (Maverick Realty) over 9 years ago

Vickie,

VA loans are also 100%, but that's not the issue at the moment.  Thanks for stopping by to comment.

Robert,

The tip came from one of our inhouse Underwriters who spent 1 1/2 hours on a conference call yesterday with a correspondent bank who funds most of our USDA loans.

Mike in Tucson

Posted by Mike Jones, Mike Jones NMLS 223495 (SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) ) over 9 years ago

Mike,

Thanks for the update. Will check to see about implementation and who is impacted. :)

Steve

Posted by Steve Hoffacker, Certified Aging In Place Specialist-Instructor (Steve Hoffacker LLC) over 9 years ago

Mike, it sounds like it may be an investor overlay.  So much fun keeping up with the extra guidelines these days!

Posted by Robert Rauf (HomeBridge Financial Services (NJ)) over 9 years ago

Robert,

I certainly hope you're right.  The UW expects it to be across the board.

Mike in Tucson

Posted by Mike Jones, Mike Jones NMLS 223495 (SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) ) over 9 years ago

I was surprised to also learn that many of the areas USDA refer to as "rural" for qualifying are really not very rural.  It can be a good loan option for certain folks.

Tina in Virginia

Posted by Tina Merritt, Virginia Real Estate (Nest Realty) over 9 years ago

Tina,

That's absolutely true.  I never reject an address because it seems to be in a built-up area.  I go to the USDA website and plug it in.

Mike in Tucson

Posted by Mike Jones, Mike Jones NMLS 223495 (SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) ) over 9 years ago

Hi Mike - It makes sense that USDA would follow suit with the "recent" focus on DTI tightening coming through from FHA to PMI. Being one who sees many "gray area" scenarios, though, I sure hope we don't completely lose the common sense approach...

Posted by Karen Cooper, Helping Homeowners w/Home Loans in 27 US States (Karen Cooper | Sr Retail Loan Originator ! NMLS # 223305 | 360 Mortgage Group LLC Austin Texas) over 9 years ago

Karen,

I'm with you on that. 

Mike in Tucson

Posted by Mike Jones, Mike Jones NMLS 223495 (SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) ) over 9 years ago

I have a client trying to get a USDA loan and it's taking forever!  I hope it closes in November.

Posted by Georgie Hunter R(S) 58089, Maui Real Estate sales and lifestyle info (Hawai'i Life Real Estate Brokers) over 9 years ago

Georgina,

It shouldn't take more than a few days after the appraisal has been received for the lender's Underwriter to sign off on it.  Then it goes to the regional USDA office.  Workloads by USDA office depend on the number of counties served by the regional office.  Here in Tucson, our USDA regional office is in Green Valley and services Pima County.  They usually take less than a week to give us a Clear to Close.

I just funded a USDA loan in Goodyear, AZ, though, and the USDA regional office that services that area of Arizona also services four other counties.  Check with your lender on (1) the timeline, and (2) the servicing area for the USDA office the loan is sent to.  There's probably only one for all of the Hawaiian Islands, I'm thinking.

There's a third thing you'll want to check.  USDA runs out of money periodically.  If you're working with a broker that doesn't fund its own loans, he has to wait for the pot to be refilled.  Not good.  If you're working with a correspondent bank like Sunstreet Mortgage, they will fund the loan with their own money regardless.

Hope that helps.

Mike in Tucson

Posted by Mike Jones, Mike Jones NMLS 223495 (SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) ) over 9 years ago

Hello Mike - good information you seem to sharing here - However, passing on information "There is a Mandate Coming Down"  3rd hand from somone you know that heard it could be happening on a conference call???  Rumors have never been good information -

Posted by JOHN HUGHES over 9 years ago

I started the loan process for usda mid october. Today is december 16 and we still havent closed. I dont know if I should blame my realtor, mortgage broker, or uncle sam. Exteremly frustrating.

Posted by Jesse over 9 years ago

Jesse,

Give me a call.  There's no reason for this to take longer than three weeks to a month total, once you have a contract.  Uncle Sam is on your side in this.

John,

It's going to happen. 

Mike in Tucson

Posted by Mike Jones, Mike Jones NMLS 223495 (SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) ) over 9 years ago

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