USDA Rural Development is Running out of Money
On March 9, 2010 we received a letter from USDA Rural Development stating that they anticipate running out of funds by the end of April 2010. If your USDA loan is in processing or you are looking for a home and plan on using USDA, this can be frightening news. It is actually quite common for USDA for run out of funds. It seems like this happens once or twice a year. Since USDA is one of the few 100% financing loans still available, it has become quite popular in recent years. When they run out of funds, Congress has to appropriate more funds to them, which usually takes a week or two. This is not guaranteed to happen, but has in the past.
If they do run out of money, you should be prepared to react if necessary. Your choices would include waiting until funds are appropriated or maybe switching your loan to an FHA or VA loan. The negative to an FHA loan would be the fact that you will now have mortgage insurance and have to come up with the 3.5% down payment. Keep in mind, this is all happening as everyone is trying to take advantage of the $8,000 first-time homebuyer tax credit, that expires April 30th. You don’t have to close by April 30th, but you do have to be under contract. The end of April is likely to be a chaotic time for most lenders, so plan appropriately.
More bad news for the housing industry. I wonder how long it will take before the industry as a whole can recover and what will it take for us to get put back on the right track.
Good informative post, it’s important to note the following:
In the past, the USDA usually runs out of funds around October/November, a much slower time for the housing market. Hopefully they can still get the program reviewed quickly.
I have not heard much yet on the delinquency rate of the USDA loans, but I would think that may come into play, when they evaluate appropriating more funds. If they are like all other mortgage programs, they are probably have historically high default rates.
James Mucci –
Michigan Refinancing
It must be quite scary! I guess it is best to plan ahead in case the USDA runs out of money, but that it is not easy either.
Good Info. Remeber to plan early if you need to switch to avoid disappointment.