USDA Loan Funding

USDA loans have had a rollercoaster year in 2010 with a resurgence in interest for the program, followed by an abrupt lack of funding that halted the loan program for the better part of the spring and summer. It appears, however, that USDA loans are about to receive additional funding, making it possible for more potential homebuyers to take advantage of the helpful program.

USDA home loans have long been a boon to lower and middle income homebuyers, and the program’s main goal is to ensure that even buyers who may not otherwise qualify for a traditional home loan have an opportunity for homeownership. USDA loans feature extended loan terms, an option that brings with it lower monthly payments than a traditional 30-year mortgage, and several flexible down payment and financing options.

In fact, the USDA is one of the only loan programs currently offering a zero down payment option. Borrowers who qualify for the program can choose to pay nothing down and roll closing costs into the loan, making the process very appealing to those who are unable to save up several thousand dollars for a home purchase but who do have the means to make a monthly payment. Additionally, in some cases, the USDA program allows borrowers to finance up to 103% of the purchase price of their new home in order to make repairs or upgrades to their property, making the purchase and renovation of an older home a viable economic option for buyers.

However, in early 2010, funding was quickly exhausted for this government sponsored loan program. While the USDA typically does not have the funds it needs to sustain it through the entire year, the speed at which funds were drained this year caught the attention of mortgage lenders and government officials alike. What’s more, many borrowers were left holding the bill for loans in process when funding ran out, having paid for appraisals, inspections, and surveys but being unable to actually follow through on their loans due to lack of funding. On March 21, 2010 House Representative David Obey (D-WI) introduced HR 4899 to the House of Representatives in order to help remedy this issue.

As of right now, HR 4899 has been passed. It was passed by the House of Representatives on March 24, by the Senate on May 27, and then signed by the President on July 29. Funds will be disbursed to the affected agencies as soon as the usual administrative actions have been completed. The passage of this bill could not come as more of a relief to those eager to use the USDA Direct and Guaranteed loan programs to purchase a home or other property, and lenders are beginning to take applications for the program once again.