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USDA, RURAL DEVELOPMENT HOME BUYER EDUCATION CLASS Agenda I . Why Are You Here? II. Renting vs. Buying III. Preparing for Home Ownership A. Up-Front -- Closing Costs B. On-Going Costs C. Hidden Costs D. Repayment Ability - Qualifying Ratios

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USDA, RURAL DEVELOPMENT

HOME BUYER

EDUCATIONCLASS


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Agenda

I. Why Are You Here?

II. Renting vs. Buying

III. Preparing for Home Ownership

A. Up-Front -- Closing Costs

B. On-Going Costs

C. Hidden Costs

D. Repayment Ability -

Qualifying Ratios


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Agenda (cont.)

IV.Credit Reports

V. Shopping for a Home

A. New Vs. Used

B. Selecting a Realtor or a Builder

VI. Home Ownership Responsibility

VII. RD Loans & Application Process


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Up Front,

On Going

and

Hidden Costs


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Up-Front Costs will include:

  • Down Payment

  • Various Closing Costs

  • Moving Costs

  • Settling inCosts

Budget

Movers


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On-Going and Hidden Costs

  • Monthly Mortgage Principal & Interest

  • Real Estate Taxes

    (1 / 12 per month to Escrow)

  • Homeowners Insurance

    (1 / 12 per month to Escrow)


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On-Going and Hidden Costs

  • Maintenance

    (A/C, wiring, plumbing, roof, yard, appliances, painting, floor cover, screens, windows, doors, driveway, etc.)


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On-Going and Hidden Costs

  • Homeowners

    Association Fee

    (if applicable)

  • Utilities - (deposits, monthly payment for use electric, water, sewer, telephone, cable, etc.


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Remember:

  • AS A HOMEOWNER, YOU ARE NOW RESPONSIBLE FOR ALL MAINTENANCE EXPENSES


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Available Cash and Assets:

List all of your sources of cash and other

assets, then decide how much you want to

apply toward up-front housing costs such as

the down payment and closing costs.

Remember, you will want to reserve some of

your assets for financial security.

It is not a good idea to totally deplete your

savings to purchase a home.




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How You Can Increase Your Borrowing Power!

  • Reduce existing debts (charge cards, installment loans, etc.)

  • Wait until income increases (raises, job changes, part-time jobs, etc)

  • Put off “Big Ticket” items (car, furniture, vacations)



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House Payment (PITI)

Gross Monthly Income

PITI plus Existing debt

Gross Monthly Income

“Sample Qualifying Ratio:”

29%

41%


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Ten Basic Rules of Money Management

1. PLAN - Plan for the future, major purchases and periodic expenses.

2. SET FINANCIALGOALS - Determine short, mid and long range financial goals


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Ten Basic Rules of Money Management

3. KNOW YOUR FINANCIAL SITUATION - Determine monthly living expenses and monthly debt payments. Compare out-going to monthly net income. Be aware of your total debt.


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Ten Basic Rules of Money Management

4. Develop A Realistic Budget - Follow your budget as closely as possible. Evaluate your budget. Compare actual expenses with planned expenses, this should include “MAD MONEY”


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Ten Basic Rules of Money Management

  • 5. Don’t Allow Expenses to Exceed Income - Avoid paying only the minimum on your charge cards. Don’t charge more every month than you are repaying to your creditors.


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Ten Basic Rules of Money Management

  • 6. Save - Save for periodic expenses, such as car and home maintenance. Save 5 - 10 % of your net income. Accumulate 3 to 6 months salary in an emergency fund.


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Ten Basic Rules of Money Management

  • 7. Pay Your Bills On Time - Maintain a good credit rating. If you are unable to pay your bills as agreed, contact your creditors and explain your situation. Contact Consumer Credit Counseling for professional advice.


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Ten Basic Rules of Money Management

  • 8. Distinguish the Difference Between Wants and Needs - Take care of your needs first. Money should be spent for wants only after needs have been met.

VS


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Ten Basic Rules of Money Management

  • 9. Use Credit Wisely - Use credit for safety, convenience, and planned purchases. Determine the total you can comfortably afford to purchase on credit. Don’t allow your credit payments to exceed 20% of your net income.


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Ten Basic Rules of Money Management

  • 10. Keep a Record of Daily Expenditures - Be aware of where your money is going. Use a spending diary to assist you in identifying areas where adjustments need to be made.

Spending

Diary


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Indicators of Unacceptable Credit

  • No Credit History

  • Payments on any account which was delinquent for more than 30 days on two or more occasions within a 12 month period

  • A foreclosure that has been completed within the last 36 months.


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Indicators of Unacceptable Credit

  • An outstanding Internal Revenue Service tax lien or any other outstanding tax liens with no satisfactory arrangement for payment.


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Indicators of Unacceptable Credit

  • Two or more rent payments paid 30 or more days late within the last 2 years.


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Indicators of Unacceptable Credit

  • Outstanding collection accounts with a record of irregular payments with no satisfactory arrangements for repayment, or collection accounts that were paid in full within the last 6 months, unless the applicant had been making regular payments previously.


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Indicators of Unacceptable Credit

  • Non-Agency debts written off within the last 36 months, unless the debt was paid in full at least 12 months ago.

PAID IN

FULL


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Indicators of Unacceptable Credit

  • Agency debts that were debt settled within the past 36 months, or are being considered for debt settlement.

  • Delinquency on Federal debt.


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Indicators of Unacceptable Credit

  • A court-created or court-affirmed obligation or judgment caused by nonpayment that is currently outstanding or has been outstanding within the last 12 months, except:


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Indicators of Unacceptable Credit

  • A bankruptcy in which:

  • Debts were discharged more than 36 months prior to the date of application; or


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Indicators of Unacceptable Credit

  • Where an applicant successfully completed a bankruptcy debt restructuring plan and has demonstrated a willingness to meet obligations when due for the 12 months prior to the date of application.


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Indicators of Unacceptable Credit

  • A judgment satisfied more than 12 months before the date of application.


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Indicators of Unacceptable Credit

An applicant with an outstanding

judgment obtained by the United

States in a Federal court, other

than the United States Tax Court,

is not eligible for a Section 502 loan.

This requirement is statutory and

cannot be waived.


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Shopping for a Home?

The following questions should serve as a partial checklist for the prospective home buyer:


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Outside the Home:

  • Are adequate shopping facilities close by?

  • Are Churches available and convenient

  • Is the community well planned?

  • Are police and fire protection adequate


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Outside the Home:

  • Are schools located to suit you?

  • Is a hospital or medical center nearby?

  • Are recreational facilities nearby?

  • Are trash and garbage disposal arrangements adequate or frequent enough?


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Outside the Home

  • Are there adequate parking spaces or garage facilities for your needs?

  • Is public transportation adequate and handy?

  • Is there a reliable and drinkable source of water with adequate pressure?


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Outside the Home

  • Is the sanitary sewage disposal system reliable and adequate?

  • What is the view out the front door? Are there eyesores? Do the neighbors appear to take good care of their properties?


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Outside the Home

  • What is the traffic like on neighborhood streets? A street empty of cars on Sunday afternoon may be clogged with traffic on weekday rush hours. If the streets are busy, are there sidewalks?


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Outside the Home

  • Is the land well drained?

  • Are lots or units arranged to suit your family lifestyle?

  • Has proper landscaping been done to prevent erosion?


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Inside the Home

  • Do walls seem sound and smooth, floors firm and level, carpentry well fitted and joined?

  • Is lighting good during both day and night?


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Inside the Home

  • Are rooms large enough to accommodate your furniture and is there sufficient wall space for arranging furniture?


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Inside the Home

  • Does the kitchen have good lighting and ventilation? Are there enough outlets for plugging in all your kitchen appliances?

  • Are there ample cabinets and counter work space for your family needs?


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Inside the Home

  • Do doors, windows and drawers work easily and safely?

  • Does plumbing work smoothly and quietly with adequate water pressure and free-flowing drains?


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Inside the Home

  • Is heating and cooling and ventilating equipment satisfactory?

  • Are there enough electrical outlets well arranged and sufficient amperage for your electrical equipment?


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Inside the Home

  • Are temperature controls located in safe and convenient places?


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RURAL DEVELOPMENT LOANS

All homes must be located in a rural area


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502 Guaranteed Loans

*30 year fixed rate. * Not subsidized. *Low to Moderate income group. *Can be either new construction or existing home. *Applicants should meet qualifying ratios of 29% PITI and 41% MOTI. *May qualify for “SHIP” down payment assistance as needed. *Apply directly with lender. *All applicants eligible for guaranteed loan who apply directly with Rural Development will be referred to a lender.


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Apply directly with Rural Development

33 year term

Fixed interest rate

Qualifying ratios for low income:

33% PITI 41% MOTI

Qualifying ratios for very low income:

29% PITI 41% MOTI

All applicants will be reviewed for participation with a local lender.

All applicants will be considered for “SHIP” down payment assistance as needed.

Must have good credit.

502 Direct Loans: All direct loan programs


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502 New Construction

  • May use any licensed contractor.

  • Rural Development does maintain a list of participating contractors.

  • All new construction loans carry a one year builders warranty


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502 Existing Home

  • No Warranty

  • Home must meet the HUD Handbook Guidelines


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502 REO PROPERTY

  • An existing home which Rural Development has taken back through foreclosure.


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502 Assumption/Transfer

  • An existing Rural Development borrower who wishes to sell their home.

  • No Warranty

  • All homes must be in condition to meet HUD Handbook Guidelines


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QUESTIONS?

RURAL DEVELOPMENT

863-533-2051 EXT. 4

http://www.rurdev.usda.gov/fl


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