Debunking Some Misconceptions

*Debunking Some Misconceptions*
**By Tony Garritano**

TonyG***I just got this today and I think it’s worth sharing. The majority of loan officers and borrowers are operating under misconceptions about USDA mortgages, according to WCS Lending, one of the largest privately held mortgage banks in the country. Marla Grassgreen, director and rural housing program manager for WCS Lending, explains that USDA mortgages, which are guaranteed by the USDA (United States Department of Agriculture) for up to 90% of their total value, are commonly thought to be limited to rural properties or low-income borrowers. Here’s the truth:

****In actuality, homes in many suburban neighborhoods are eligible for USDA mortgages, and household income for applicants for USDA mortgages can reach up to$75,000 for a single person, and over $98,000 for a household of five or more, depending on the property’s location. Plus, USDA mortgages are the only mainstream, first trust deed mortgages that permit borrowers to finance 102% of the appraised value of a home, even if it is greater than the purchase price. This allows for borrowers to finance closing costs, in addition to a 2% guarantee fee.

****“There are good, qualified borrowers who wouldn’t qualify for a Fannie Mae or Freddie Mac mortgage because of the income, credit or down payment requirements of those programs. Were it not for USDA mortgages, these people would have to remain renters and miss out on the benefits of home ownership when in reality, they can get into a home with no down payment,” says Grassgreen. “The issue is, there are many misconceptions about USDA loans and few lenders who understand them, so many borrowers are being told they don’t qualify for a mortgage, when they actually do.”

****USDA loans offer 102% financing, competitive rates, and a common sense underwriting approach, explains Grassgreen. The U.S. Department of Agriculture has allotted $24 billion for mortgages throughout 2013, and approximately 90% of USDA mortgages are for home purchases. North Carolina is the largest producer of USDA loans, followed in order by Texas, California, Florida and Michigan. Subject properties must be located in eligible rural areas, cities and towns with populations less than 20,000.

****“One of the common misunderstandings about USDA loans is that they are limited to very low priced homes in small rural areas,” states Grassgreen. “In reality, our average loan amount is $140,000 and we are making loans all across the country, including suburban towns that are anything but rural. In fact, in some states, the vast majority of the state is eligible for USDA loans.”

****WCS Lending is fully delegated to underwrite USDA loans and is one of the few mortgage companies with a specialized division dedicated to USDA mortgages, which is staffed with coordinators, closers, shippers and underwriters that are specifically trained and experienced to efficiently handle USDA loans.

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.