Comparison of Direct and Guaranteed USDA Rural Housing Loan

Comparison of Direct and Guaranteed

USDA Rural Housing Loan Programs

(Georgia)

Highlights of the “Section 502” Single Family Housing Direct and Guaranteed Loan

Programs as processed in Georgia

USDA is an equal opportunity provider, employer and lender.

Table 1: Program Benefits

Direct Home Loan Program

Guaranteed Home Loan Program

Who makes and

processes the loan?

Applications are accepted and

processed through your local Rural

Development Service Center year

round.

This list shows the phone number

for the USDA Rural Development

Georgia Service Centers for each

Georgia County.

Applications must be submitted through

an approved lender, (a bank, mortgage

company or credit union). USDA does

not endorse any specific private sector

lenders.

Some Nationally Approved Lenders are

on this list of participating lenders; the

list is not inclusive of all approved

lenders however.

Governing

Regulation and

Handbook

• The Housing Act of 1949 as

amended, 7 CFR, Part 3550

•

• HB-1-3550 - Direct Single Family

Housing (SFH) Loans Field Office

Handbook

7 CFR, Part 3555

HB-1-3555 – Single Family Housing

(SFH) Guaranteed Loan Program

Technical Handbook

No Down Payment

The program offers 100 percent

financing. The appraised value can

be exceeded but only by 1) Escrow

deposit, 2) Appraisal fee, and 3)

Tax service fee, 4) Homebuyer

education cost.

Refer to HB-1-3550 Chapter 6.

The program offers 100 percent

financing. The appraised value can be

exceeded but only by the amount of the

one-time, up front Guarantee Fee.

Refer to HB-1-3555 Chapter 7.

USDA RD is not

“FHA”

USDA Rural Development (RD)

has its own Regulations and

accountability. Though we may

adopt some Federal Housing

Administration (FHA) guidelines,

RD does not follow FHA

guidelines on all matters.

USDA Rural Development (RD) has its

own Regulations and accountability.

Though we may adopt some Federal

Housing Administration (FHA)

guidelines, RD does not follow FHA

guidelines on all matters.

Property Location

Rural Only

The property must be located in an

eligible “rural area.” Eligible rural

areas can be located on the

interactive map at the USDA

Eligibility website.

Refer to HB-1-3550 Chapter 5

The property must be located in an

eligible “rural area.” Eligible rural areas

can be located on the interactive map at

the USDA Eligibility website.

Refer to HB-1-3555 Chapter 12

Target Customers

“Very-Low” to “Low” income

households

Refer to HB-1-3550 Chapter 1

Up to “Moderate” income households

Refer to HB-1-3555 Chapter 1

Rates and Terms

The rate is fixed, current interest

rate for Single Family Housing

Direct Home Loans is posted

online at

https://www.rd.usda.gov/programs-

services/single-family-housing-

direct-home-loans/ga. Rates are

subject to change monthly. The

loan term is 33 years and may be

38 years in some cases.

The rate is fixed at the Lender’s market

rate but capped at FNMA actual/actual

90-day rate plus 1 percent rounded to

the nearest ¼ percent. Rates are subject

to change monthly. The loan term is 30

years.

Fees

A $25 credit report fee is due

payable. All other typical fees may

be part of the loan.

A one-time, upfront Guarantee Fee is

charged (currently 1 percent and can be

loaned above the appraised value). An

Annual Fee of 0.35 percent is charged.

First-Time

Homebuyers (FTHs)

Loans are not just for First-Time

Homebuyers (FTHs). A FTH is a

borrower who hasn’t owned a

home in the past three years.

Homebuyer Education Certificate

is required for FTHs.

Loans are not just for First-Time

Homebuyers (FTHs). A FTH is a

borrower who hasn’t owned a home in

the past three years.

Homebuyer Education Certificate is

recommended for FTHs.

Primary Home and

Other Credit

The applicant cannot already own

an adequate home that meets

family needs and must be unable to

obtain a loan from other lenders

offering reasonable rates and

terms. Very-Low income

applicants automatically meet this

requirement.

The applicant cannot already own an

adequate home that meets family needs

and must meet test for inability to obtain

conventional credit.

Table 2: Income and Ratios

Direct Home Loan Program

Guaranteed Home Loan Program

Maximum Income

Limits

• The maximum Adjusted

Household Income is the “Low”

limit. Applicants must meet

income eligibility; adjusted

income limits by county and state

can be found at the URL

https://www.rd.usda.gov/files/RD-

DirectLimitMap.pdf.

• Refer to HB-1-3550 Chapter 4

The maximum Adjusted Household

Income is the “Moderate” limit found at

http://www.rd.usda.gov/files/RD-

GRHLimitMap.pdf

Refer to HB-1-3555 Chapter 9

Household Income

Verified income of ALL

household members cannot

exceed the Income Limit for the

desired county.

Refer to HB-1-3550 Chapter 4

Verified income of ALL household

members cannot exceed the Income

Limit for the desired county.

Refer to HB-1-3555 Chapter 9

Adjusted Household

Income

Deduct from gross household

income: $480 per child under 18

years old or over 18 if a full time

student, 100 percent of child care

paid for children under 12 years

old, elderly household. Deduct

$400 and medical costs that

exceed 3 percent of gross income.

Refer to HB-1-3550 Chapter 4

Deduct from gross household income:

$480 per child under 18 years old or over

18 if a full time student, 100 percent of

child care paid for children under 12

years old, elderly household. Deduct

$400 and medical costs that exceed 3

percent of gross income.

Refer to HB-1-3555 Chapter 9

Household Assets

Non-retirement assets more than

$15,000 ($20,000 for elderly)

must be used toward the purchase

of the property.

Refer to HB-1-3550 Chapter 4

Income from assets valued over $5,000

must be calculated in the household

income.

Refer to HB-1-3555 Chapter 9

Grossing-up

Non-taxable income may be

grossed up by 120 percent to

boost repayment income only (but

never for household income

which is compared to income

limits.)

Non-taxable income may be grossed up

by 125 percent to boost repayment

income only (but never for household

income which is compared to income

limits.)

Lowered House

Payments

House payments can be paid on

household income (subsidized), if

eligible. “Subsidy recapture” may

apply.

Refer to HB-1-3550 Chapter 6

Not Applicable

Repayment Ratios

The principle, interest, property

taxes and insurance (PITI) cannot

exceed 29 percent of repayment

The principle, interest, property taxes

and insurance (PITI) cannot exceed 29

percent of repayment income for Very

income for Very Low income

applicants, and cannot exceed 33

percent for Low income

applicants. Total Debt ratio

cannot exceed 41 percent for both,

exceptions may apply, for

example, homes that are certified

super-energy-efficient may

provide applicants an extra 2

percent increase in repayment

ratios.

Refer to HB-1-3550 Chapter 6

Low income applicants, and cannot

exceed 33 percent for Low income

applicants. Total Debt ratio cannot

exceed 41 percent for both, exceptions

may apply, for example, homes that are

certified super-energy-efficient may

provide applicants an extra 2 percent

increase in repayment ratios.

Refer to HB-1-3555 Chapter 11

Maximum Loan

Amount

House must be “modest”, decent,

safe and sanitary. Modest is

defined by dollar limits and the

house must be less than 2,000

square feet. Regardless of

repayment ability, applicants may

never borrow more than the Area

Loan Limit.

Refer to HB-1-3550 Chapter 5

No limit.

Refer to HB-1-3555 Chapter 7

Table 3: Credit

Direct Home Loan Program

Guaranteed Home Loan Program

Credit History

A Tri-Merged Credit Report

(TMRC) will be ordered for

$25.00. A “reliable” credit score

of 640 or more is considered

acceptable credit, but Federal

Judgments are unacceptable

regardless of score.

Alternative credit such as rent,

utility bill and phone bill

payments may be used if there

isn’t enough credit to obtain a

score on the report.

“Reliable” score consists of three

or more trade lines in the last 24

months open and active for 12 or

more months. If the score is less

than 640.

Refer to HB-1-3550 Chapter 4

Automated Merged and Residential

Mortgage Credit Reports are Acceptable.

A “validated” credit score of 640 or more

is considered acceptable credit but

Federal Judgments are unacceptable

regardless of score.

Alternate credit is allowed.

“Validated” score consists of two or

more trade lines open for 12 or more

months when a verified rental history is

obtained; three trade lines are required if

there is no rental history.

Refer to HB-1-3555 Chapter 10

Verification of Rent

A two year rental history is

evaluated if the applicant’s credit

score is less than 640. One year

of rental history is evaluated if the

applicant’s credit score is more

than 640.

Refer to HB-1-3550 Chapter 4

A two year rental history is evaluated if

the applicant’s credit score is less than

680. No rental history is evaluated if the

applicant’s credit score is more than 680

(unless ‘Refer’).

Refer to HB-1-3555 Chapter 10

Table 4: Property Requirements

Direct Home Loan Program

Guaranteed Home Loan Program

Property Types

Allowed

• Existing Single Family

Homes

• New Construction (less

than one year old and

never occupied)

• Proposed Construction

• Can be Site Built

• Modular

• PUD

• Condominiums meeting

certain criteria

• Manufactured homes must

be new

Refer to HB-1-3550 Chapter 5

• Existing Single Family Homes

• New Construction (less than one

year old and never occupied)

• Proposed Construction

• Can be Site Built

• Modular

• PUD

• Condominiums meeting certain

criteria

• Manufactured homes must be

new

Refer to HB-1-3555 Chapter 12

Required Repairs

Only repairs necessary to make

the property structurally sound,

functionally adequate and in good

repair are required. 100 percent

of repair costs can be financed

based on the as-improved value.

Refer to HB-1-3550 Chapter 5

Only repairs necessary to make the

property structurally sound, functionally

adequate and in good repair are required.

100 percent of repair costs can be

financed based on the as-improved value.

Refer to HB-1-3555 Chapter 12

Income Producing

No income producing

(commercial) properties.

Typical in-home businesses are

allowed.

Refer to HB-1-3550 Chapter 6

No income producing (commercial)

properties.

Typical in-home businesses are allowed.

Refer to HB-1-3555 Chapter 12

Termite Letters

Always required on new

construction. Not required on

Existing single family home

unless inspection reveals

infestation or is part of the

contract.

Refer to HB-1-3550 Chapter 5

Always required on new construction.

Not required on Existing single family

home unless lender or inspector (FHA

appraiser) requires one.

Refer to HB-1-3555 Chapter 12

Septic

Property must have an adequate

and properly functioning waste

water disposal system. The

system must be inspected and

certified by a private company.

Refer to HB-1-13550 Chapter 5

Property must have an adequate and

properly functioning waste water

disposal system. The system must be

inspected and certified by the lender’s

inspector (FHA appraiser).

Refer to HB-1-3555 Chapter 12

Wells

Individual wells require well test

to certify the water quality meets

state and local requirements.

Shared wells or community wells

Individual wells require well test to

certify the water quality meets state and

local requirements. Shared wells or

are acceptable under certain

conditions.

Refer to HB-1-3550 Chapter 5

community wells are acceptable under

certain conditions.

Refer to HB-1-3555 Chapter 12

In-ground

Swimming Pools

Not allowed.

Refer to HB-1-3550 Chapter 5

Allowed. (statement that pool doesn’t

contribute to the value is not required

any longer).

Refer to HB-1-3555 Chapter 12

Georgia Building

Codes

The Georgia Department of

Community Affairs is the

“keeper” of Georgia’s

Construction Codes.

There are eight mandatory codes

that all residential structures must

meet in Georgia regardless of

local code enforcement.

1. International Building

Code, 2012 Edition, with

Georgia Amendments

(2014/2015 GA

Amendments)

2. International Residential

Code, 2012 Edition, with

Georgia Amendments

(2014/2015 GA

Amendments)

3. International Fire Code,

2012 Edition (2014 GA

Amendments)

4. International Plumbing

Code, 2012 Edition, with

Georgia Amendments

(2014/2015 GA

Amendments)

5. International Mechanical

Code, 2012 Edition, with

Georgia Amendments

(2014/2015 GA

Amendments)

6. International Fuel Gas

Code, 2012 Edition, with

Georgia Amendments

(2014/2015 GA

Amendments)

The Georgia Department of Community

Affairs is the “keeper” of Georgia’s

Construction Codes.

There are eight mandatory codes that all

residential structures must meet in

Georgia regardless of local code

enforcement.

1. International Building Code,