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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





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

agenda cont
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

Up Front,

On Going


Hidden Costs

up front costs will include
Up-Front Costs will include:
  • Down Payment
  • Various Closing Costs
  • Moving Costs
  • Settling inCosts



on going and hidden costs
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)

on going and hidden costs7
On-Going and Hidden Costs
  • Maintenance

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

on going and hidden costs8
On-Going and Hidden Costs
  • Homeowners

Association Fee

(if applicable)

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

how you can increase your borrowing power
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)
sample qualifying ratio
House Payment (PITI)

Gross Monthly Income

PITI plus Existing debt

Gross Monthly Income

“Sample Qualifying Ratio:”



ten basic rules of money management
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

ten basic rules of money management17
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.

ten basic rules of money management18
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”

ten basic rules of money management19
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.
ten basic rules of money management20
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.
ten basic rules of money management21
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.
ten basic rules of money management22
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.


ten basic rules of money management23
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.
ten basic rules of money management24
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.



indicators of unacceptable credit
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.
indicators of unacceptable credit26
Indicators of Unacceptable Credit
  • An outstanding Internal Revenue Service tax lien or any other outstanding tax liens with no satisfactory arrangement for payment.
indicators of unacceptable credit27
Indicators of Unacceptable Credit
  • Two or more rent payments paid 30 or more days late within the last 2 years.
indicators of unacceptable credit28
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.
indicators of unacceptable credit29
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.



indicators of unacceptable credit30
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.
indicators of unacceptable credit31
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:
indicators of unacceptable credit32
Indicators of Unacceptable Credit
  • A bankruptcy in which:
  • Debts were discharged more than 36 months prior to the date of application; or
indicators of unacceptable credit33
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.
indicators of unacceptable credit34
Indicators of Unacceptable Credit
  • A judgment satisfied more than 12 months before the date of application.
indicators of unacceptable credit35
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.

shopping for a home

Shopping for a Home?

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

outside the home
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
outside the home38
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?
outside the home39
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?
outside the home40
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?
outside the home41
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?
outside the home42
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?
inside the home
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?
inside the home44
Inside the Home
  • Are rooms large enough to accommodate your furniture and is there sufficient wall space for arranging furniture?
inside the home45
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?
inside the home46
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?
inside the home47
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?
inside the home48
Inside the Home
  • Are temperature controls located in safe and convenient places?
rural development loans


All homes must be located in a rural area

502 guaranteed loans
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.

502 direct loans all direct loan programs
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
502 new construction
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
502 existing home
502 Existing Home
  • No Warranty
  • Home must meet the HUD Handbook Guidelines
502 reo property
  • An existing home which Rural Development has taken back through foreclosure.
502 assumption transfer
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



863-533-2051 EXT. 4