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For those of you have heard about Rural Development (RD) and what it can do for future homeowners, you can truly appreciate how special it is that this program is back while the current pool of funds is still available.  On March 10th of this year, an official statement was released by the SFH Loan Guarantee Division of the USDA.

Now, when we hear from this division we normally are expecting some statistics or legislative type of memo introducing a new guideline.  What we aren't expecting is a Notice Of Funding letter.  That type of letter can go one of two ways.  Either that Rural Development was just given an increase of funds to work with, or something telling you the program was out of funds.  It is extrememly rare to get the latter of the two.  Rarely does a government lender run out of funds for real estate programs, especially in this market.

Here is the statement:

"Notice of Funding

This message is to notify you that program funding for the Single Family Housing Guaranteed Loan Program will likely be exhausted by the end of April, 2010.

Once funding is exhausted, the Agency will not issue Conditional Commitments “subject to receipt of appropriated funds.” This is because it is not certain when additional funding will be available.

Limited funding may become available for disaster areas declared in 2008, or in disaster areas declared for Hurricanes Katrina and Rita. Limited funding may also become available as prior Agency commitments are de-obligated, however, such funding will be very limited."

The entire concept of Rural Development was fantastic when it was brought to the market so long ago.  Over the years, lenders created mortgage programs that mirrored the RD program in regards to 100% financing, but at considerably higher interest rates.  Many homeowners opted for these type of programs, believing the "red tape" of Government Lending would be to daunting and elected to go with the easier route to homeownership.

The perception that Rural Development loans are full of "red tape" is real, but unwarranted.  RD loans are like any other lending product as they have specific guidelines that must be adhered to and requirements that must be met.  While there may be a little more paperwork and requirements than the alternative solutions, it isn't considerably different.....to a professional.

Those alternative 100% lending programs ALL went away....yes, all of them!  Rightfully so, they were a costly approach to homeownership.  Sadly, in the end, many of these homes ended up in foreclosure.

Simply put, Rural Development is traditionally one of the least used and known about programs. There are certain income guidleines, but most of the population actually makes LESS than the maximum income limits allowed for RD loans.  There are also geographical restricitions.  The property must be located in an "RD Approved" location. 

As a lender that specializes in Rural Development loans, we can tell our clients if the home they are looking at is eligible for an RD loan.  Many times, there are specific areas that are "RD Eligible".  That allows our clients the ability to look at specific areas and know that they can get 100% financing if they purchase a  home in those areas.

In all, the fact that Rural Development loans have been approved for additional funding is fantastic.  It shows how much the program is needed in a lending environment where there are such few options available.  If you have little money and are struggling to come up with a downpayment, this program could be just the thing you need. 

Housing prices are ridiculous.  I can't remember ever seeing prices this low.  Interest rates are phenomenal.  I can say with certainty that interest rates have never been this low.  Any tracking measures you care to use in your assesment of the current market will all reflect this.  To buy a house now is to truly invest in your future.

There is one tremendous down side to Rural Development loans though.  The problem has existed for years but rarely have we seen it come to life, until this year.  The major issue with Rural Development is that the funds are limited......when they are gone they are gone.  The ONLY exception to that age old policy is the abilty of Congress to pass a bill allowing additional funds.  Thank goodness we are fortunate enough for that to have happened recently.

For a program that generally lasts all year to run out of funds in just over 100 days is a BIG problem.  With all that being said, there will be a "mad rush" on these loan applications in the next few weeks and hopefully for some time after that.  Funds are limited so who really knows right now.  Federal guidelines require that all RD Applications be processed int the order they are received.  What this means is that those who wait risk the chance of missing out on these very funds being available to them.

For as rare as it is to run out of funds so quickly, it reflects how wonderful the program is and how many people it can assist....and apparently IS assisting.  If Rural Development is a lending product that could help you, a further look into it now instead of later would be far more prudent. But hey, you could wait and try again next year!

You can visit our information center to learn more about how you can benefit from the latest legislation approved by Congress to help homeowners.