Jeremy Drobeck ~ (269) 488-9494 ~ Apply Now ~ Contact Us

In celebration of National Homeownership Month the USDA's Acting State Director for Michigan announced the top 10 rural development lenders in Michigan.  We are proud to say that again for 2016 Amerifirst Home Mortgage is number one!  In fact Amerifirst had a 16% market share for the program in 2016.  The second lender on the list pulled a meer 5.7% market share.   Simply put Amerifirst dominated the Michigan market with this program!  

The Rural Development program gives home buyers the opportunity to purchase a home with no money down.  If you would like more info on the program or to find out what area's qualify for the program check out RD Area Maps or give Jeremy a call at 269-488-9494.

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HUGE Announcement!!!!

The USDA made some major improvements to the Single Family Housing Guaranteed Loan Program also know as a Rural Development loan.  The upfront guarantee fee changed from 2.75% to 1% of the loan amount and the annual fee changed from .5% to .35% of the average scheduled unpaid principal balance for the life of the loan.  What's that mean???? 

Here is a 150,000 example:

  Old Program New Program
Upfront Fee $ 4,241.63 $ 1,515
Monthly Fee $63.75 $43.84

Now the really cool thing is the RD loan program is once again in many cases much more attractive to home buyers than an FHA loan.  Lets run a quick comparison.

FHA VS RD  $150,000 price, assuming 4% interest rate, $200 for property taxes, & $80 for insurance

  FHA Rural Development
Principle & Interest $703.15 $723.36
Insurance $80 $80
Taxes $200 $200
Mortgage Ins. (PMI) $101.71 $43.84
Total payment: $1,084.86 $1,047.20
     
Down Payment Required $5,250 $0
 So RD saves $38 per month and is zero down!

For more information feel free to reach out to me or download this flyer!

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With the USDA Rural Development option, you can borrow 100% of the appraised value. This means you don't need to come up with the down payment. In fact, you can actually borrow 2% more than the appraised value, and use the extra to make some light repairs or home improvements. The main requirement for a USDA Rural Development mortgage is that the property must fall within certain geographical areas, outside the city limits of major metropolitan centers.

Now, this doesn't mean you have to live "way out in the country." While that is an option if it appeals to you, many areas that fall under the Rural Development umbrella are actually more suburban than you'd expect. As an example, rural development in northern Indiana covers most areas except Gary, South Bend and Fort Wayne. Other villages, towns and areas are eligible.

Under the Guaranteed Loan program, USDA Rural Development guarantees loans made by private sector lenders like AmeriFirst Home Mortgage. A loan guaranteed through RD means that, should the individual borrower default on the loan, RD will pay the private financier for the loan. You work with AmeriFirst and make your payments to us.  More infomation can be found here 1stclassmortgageservice.com/index.php/rural-development
 

 

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Update!!!!!

If you have seen some of the other information I put out on this in recent month then you know that RD no longer allows Real Estate Agent Admin fees (just like the VA). In the guidelines that had been published RD simply said it’s not an allowable fee.  Good news for agents we recently found was that by saying ‘not an allowable fee’ they mean that the fee can neither be financed into the loan or paid with seller concessions, but that if the borrower paid the fee out of pocket it could be charged.

The key is in the definition of unallowable fees.  What this means to you?

If the Realtor Admin Fee is charged then the borrower’s bottom line must reflect as much.  Examples:

  • If the borrower gave no earnest money deposit and seller concessions covered all other fees then the borrower’s bottom line at closing would be the amount of the Realtor Admin Fee. 
  • Tax proration’s can be used to offset the charge. 
  • If the borrower gave a $500 earnest money deposit and the Realtor Admin Fee is $300 then the expectation would be the borrower would get just $200 back at closing.  Thus using their own funds to pay the fee (assuming the seller is paying all the other closing costs).

Bottom line, if you typically charge an admin fee I would throw it on there and see what happens!

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So maybe you heard rumblings of something happening at RD.  Well there certainly are changes being made.  Some positive some not so great.  First off lets talk about timing.  RD is not out of money, for the last week of November they are not accepting application, but that's not so bad, they anticipate being caught up on all the files Dec. 1St when they start accepting applications again.  If we can go from 3+ week turn times to a couple days, well that's fantastic!  For UP TO DATE Turn Times follow this link.

Here is an outline of what affects real estate agents in regards to the guideline changes:

1.  Barn are O.K.

2. Site value requirement removed (should have any land split issues)

3. Pools are O.K.

4. No more Realtor admin fees. . . .  I know that one hurts. - Follow this link for an update on this

It should be noted that we are still waiting to see how all this unfolds but come Dec. St these changes will go into effect.

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I was going over loan options with a home buyer the other day and realized that we spend a lot of time talking about mortgage insurance and when comparing loan programs for people the cost of the PMI really comes into play.  When I sat down to make this video I was simply going to go over the basic options and the costs associated with each.  The video turned into more of a why not to get a FHA loan, which wasn't my intent.  However, the numbers don't lie FHA is the most expensive loan out there right now.  Its the new "subprime"  funny that the government loan program who's mission statement reads: "HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all . . . " is the most costly of all the home financing options.  Anyways, we close tons of FHA loans and it is often the only option for people wanting to buy now; so enough said.  The chart outlines the basic's reach out to me anytime with questions.

 

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When it comes to getting a mortgage timing is everything.  "When are we going to close?" is the question we get asked more often than anything else.  The Real Estate Agents, buyers, and sellers all need to know when closing is going to occur.  One of the biggest challenges with Rural Development financing is closing time frames.

The Michigan RD offices current turn times:

2 Day Turn Times

* We try to keep this as up to date as possibleThis email address is being protected from spambots. You need JavaScript enabled to view it. us if you need more info

With RD the basic process works as follows:

  1. Offer accepted
  2. Start loan process & order the appraisal
  3. Appraisal received  (after 1 - 2 weeks)
  4. File goes to underwriting
  5. Once files back from underwriting it is sent to RD for there approval.
  6. This is where we sometimes get caught in traffic.  Sometimes RD turns files in a matter of days, sometimes weeks or even months.  The file will literally sit up there in a stack and they review them in the order received.  They get to it when they get to it.  Current turn times are posted above.
  7. File comes back from RD, our underwriter clears it for closing
  8. Closing scheduled a few days later.

 

So what's all that mean?   Basically if a normal loan takes 30 - 45 days to close, take whatever the above turn time is for RD and add it to it.   Generally speaking you will see those RD turn times very fast in the beginning of the year, then as spring hits and things pick up they get more and more backed up, by November/December they are starting to catch up again and the cycle continues.

Although RD approval is more of a formality it still is a requirement that the RD fairies bless the file prior to closing, so we are often stuck waiting.

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UPDATE FROM BELOW INFO:

RD is issiung conditional commitments "subject to funding"

We ARE Currently Closing and Funding RD Loans!

 

 

I want to update you on the status of RD lending with the government coming back on line last night.

Rural Development has sent out a couple different notices here is a brief summary:

1. They have not yet recived allocated funding.

2.  They have not received authority to issiue approvals subject to the funding.

3.  They can not issiue conditional commitments.

4. They are reviewing files, so that once they can issiue the commitments they will already have the file reviewed.

 

In a nushell:

Hopefully end of next week they will be able to issiue commitments and we can in theory start closing these loans again.  In the mean time we will continue to process and send loan up to RD, so they can get in line.

 

Here is the notice striaght from RD

October 18, 2013

Program and System Availability Update

 

Several USDA websites/applications were disabled in connection with the recent Federal Government shutdown.  This has delayed USDA’s completion of fiscal year-end accounting processes.  This process will take several days to complete.  The Guaranteed Underwriting System (GUS) will become operational on Monday, October 21, 2013. 

Other internal USDA systems will not be operational until late next week.  For example, USDA will be unable to process lender submitted loan closings until late next week.

We are uncertain when fiscal year 2014 funding will become available in the system.  Thus, beginning on Oct. 21, 2013, we will begin issuing Conditional Commitments “subject to commitment authority.”  Any Conditional Commitments issued “subject to commitment authority” will contain the following language:

Funds are not presently available for this Conditional Commitment. The Rural Housing Service’s obligation under this Conditional Commitment is contingent upon the availability of an appropriation from which payment for contract purposes can be made. No legal liability on the part of the Rural Housing Service for any payment on this Conditional Commitment may arise until funds are made available to the Rural Housing Service State Office where the application was submitted for this Conditional Commitment and until the Lender receives notice of such availability, to be confirmed in writing by that Rural Housing Service State Office.  More specifically, this Conditional Commitment is subject to the Rural Housing Service receiving sufficient funds (in the Program Financial Control System for the Single Family Housing Guaranteed Loan program for the Type of Assistance and State of application submission) to fund this and all prior eligible outstanding applications in their entirety in the time and date order received in the State of application submission.  When such funds become available, Rural Development will notify the lender, and the guarantee process will continue subject to all applicable Agency regulations and conditions set forth in this Conditional Commitment.  Rural Development will not reserve loan funds for applications in process during this timeframe.  Lenders may close the loan as scheduled.  The lender will assume all risk of loss for the loan until Rural Development obligates funds and the Loan Note Guarantee is subsequently issued.  When the lender requests the Loan Note Guarantee, the lender must certify to the Agency, using the process provided in this commitment, that there have been no adverse changes to the borrower’s financial condition since the date the Conditional Commitment was issued by the Agency.  The lender will submit the appropriate guarantee fee at the time they request the Loan Note Guarantee.  The loan will be subject to an annual fee of 0.4 percent of the average scheduled unpaid principal balance of the loan. The Agency will not be able to issue the Loan Note Guarantee until these conditions are met and funding is obligated.”

 

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Yeah the shutdown is a big deal for a lot of people and their families, but the houseing market certinaly hasnt come to a screaching hault.  I was headed into work today listening to the radio and all the news about the government shutdown.  We all knew it was possible and by the end of the day yesterday pretty much inevitable.  The congressmen being interview on the radio made it sound like the housing market was going to come to a screeching halt.  Heck you would think that all the Realtors and Loan Officers were going to get a couple weeks off while Uncle Sam figured things out.  Well I got some breaking news, we are all still here, still working away, & most importantly still closing loans!  So what’s the real deal?  What loan programs have been affected by the shutdown?  Here’s the scoop:

  1. Conventional Loans: Unaffected - depending on income basically the IRS will not issue tax return transcripts (Form 4506 T). Typically these are ordered & reviewed prior to closing.  Any loan that has other income (mainly self employeed borrowers) that would be reported on the tax returns will not be able to close until we have the tax transcripts. This includes borrowers trying to do 5 to 10 financed properties as those require IRS tax transcripts to deliver to Fannie Mae. So borrower who recive a w2 we can close no problem.
  2. VA Loans (veterans administration): Unaffected
  3. FHA Loans:  Unaffected   (at least for the foreseeable future, so basically if this thing drags out for months FHA could be affected but it's not very likely)
  4. RD Loans Affected - this ones kind of a big deal.  Since everyone is still working except for the people at RD we can still get the file ready to close.  However, we for we can close the loan RD needs to issue a conditional commitment and the final loan has to be run thru their system.  Currently there is nobody there to review the file and the system (GUS) that we run the loans thru is offline.  So plan for delays on all RD files.  How long is unknown, but for loans here in Michigan if the file isn’t up at RD already it will be at least 30 days from whenever all those government employees go back to work.

So to recap we are still closing and funding all loans with the exception of those rural development loans. 

If you want more info you can read the governments contingency plan here http://www.whitehouse.gov/omb/contingency-plans

 

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USDA Rural Development - RD program backlogged!

 

**** As of 1/16/2014 the backlog is nearly worked thru and turn times are running approx 2 weeks.

Just wanted to make sure everyone is aware of the backlog at rural development.  The process for lenders originating RD loans is the following:

1.  Lender works up and underwrites file (appraisal, title work, income & asset verification, etc. . . )

2. File is submitted to Rural Development for their blessing

3. Loan closes

Step 2 is the hold up right now and it affects all lenders.  The problem is that historically RD turn times were around 1 week.  For awhile they were up to 2 weeks and we thought that was bad, but still not all that news worthy.  Currently RD is looking at files submitted to them on the 15th of last month!  That's right they are running roughly 30 days.  Whats that mean to you.  When your structuring those purchase contracts make sure you allow for a 60 day close time on all buyers obtaining RD financing.  We are making every effort on our end to get the file up to them and in line as quickly as possible but for at least the foreseeable future make sure you plan a 60 day close.

With that said RD is still a great program.  More info here  Some highlights include:

  • Zero Down
  • Low monthly mortgage insurance (PMI)
  • Ability to finance closing costs into the loan
  • Ability to finance repairs into the loan
  • Visit RDArea.com for a map of eligible areas
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