If you took a look at my market reports this month for the Iowa City area you’ll know that North Liberty had a great year. Home sales were up by 15% last year in what otherwise was a slow market in the area. North Liberty has got a couple of things going for it. The first is location. Situated between Iowa City and Cedar Rapids it’s perfect for those who prefer to live a little further away from all the action. What it also has going for it is that it has a lot of newer or new homes at somewhat better prices than Iowa City or Coralville. (Sticker shock is not unusual for folks relocating to Iowa City and Coralville).
Have I peaked your interest on North Liberty yet? That was the plan… Now I’m going to tell you about a third thing North Liberty has going for it. If you buy a home in North Liberty, it’s considered a rural area and you may be able to qualify for a USDA Rural Development Loan that offers 100% financing. Right now with banks looking ever closer at credit conventional loans are harder to qualify for and the USDA Rural Development Loan has become a very lucrative alternative. In short, the Rural Development loan offers you 100% financing on a home loan with a low interest rate AND no PMI (Private Mortgage Insurance).
Below are some FAQ’s put together by a very knowledgeable loan officer in the area, Jessica Greving, VP at Residential Mortgage Network in Coralville. She definitely knows her way around specialty loan programs like the USDA Rural Development Loans, FHA and VA Loans.
What are the basic eligibility requirements for a USDA Rural Development Loan?
Homes financed through the USDA Rural Development Loan must be in a rural area. That would include North Liberty, Solon, Tiffin, Oxford, Williamsburg, Amana and other communities with less than 20,000 residents. The buyer should make less than the RD income guideline (example: 1-4 person family in Johnson County should make less than $87,400 and a 5 or more person family should make less than $115,350. If a buyer pays childcare they can reduce their income by the childcare amount. Visit USDA Rural Development Website for a detailed itemization of income qualification.
How long will it take to process and close a RD loan with RMN, Inc.?
Since RMN, Inc. has the authority to approve the RD loans and is familiar with the process, it is just as quick as any other financing. If you do request something faster than the average approval time, please contact Jessica directly to determine appraisal time frame.
What is the difference between a Guaranteed loan and a Direct loan?
The Guaranteed loan is offered through a participating lender like Residential Mortgage Network, Inc. There are no prepayment penalties, no recapture tax and income is not checked periodically after closing.
A Direct loan is offered directly through the local USDA office (most counties in this area are served by the USDA office in Tipton) and is designed to help very low income borrowers. Borrowers receive a subsidized interest rate and their income is checked every 2 years.
Do I need a pest inspection?
Yes, a pest inspection is required on all RD transactions unless it is a 2nd floor or higher condominium purchase. It can be paid by buyer or seller.
What issues are there with appraisals?
The appraiser is required to note the following: Chipped/peeling paint on the exterior of the home if built prior to 1978, less than 2 years remaining life on the roof, positive draining around the exterior foundation of the home (especially if the basement appears moist), waste pipe relief valve on the water heater to be extended to within 8″ of the floor. These are the most common occurrences.
Is the interest rate higher?
No, RMN does not charge a higher interest rate. Though rates from one program to the next can vary a bit from day to day, the RD rate is generally in line with the FHA, VA and conventional rates. Additionally, there is not a charge for credit scores down to 620.
Are there higher fees?
The standard closing costs are approximately $1200. USDA charges a 2% fee that is added to the buyer’s loan. A buyer purchasing a home for $100,000 will borrow $102,040. The program does not charge monthly PMI.
Are condominiums eligible for the RD loan program?
Yes! There is still 30-year fixed condominium financing available! If you have already identified the property you’d like to buy, your agent should contact your lender for an approved condominium list.
Getting pre-approved is the first order of business when you buy a home and talking to a few different lenders about the different options is a good idea. Choosing a home loan is one of those times when the devil is in the details…
Need some help navigating your way through the home buying process? Give me a call or drop me an email. I’m here to help!
