Written By: Frankie Lacy, Op-Ed Writer
The Rural Housing Development’s (RHD) Guaranteed Rural Housing Program (GRH) is designed to assist borrowers in obtaining safe, sanitary, and adequate housing in rural areas. RHD applies income limitations to designated counties in each state to determine eligibility.
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The GRH program is similar to a mortgage insurance program. The borrower may purchase a home at 100% LTV based on the appraised value on a 30 year fixed rate loan. The one time, upfront guarantee fee can be added to the loan as well. As a result, the total LTV on GRH loans is often between 100% – 103%. In addition to this upfront fee, the borrower will have monthly insurance premiums that are added to their qualifying housing expenses.
GRH loans can be underwritten manually or automatically through the Guaranteed Underwriting System, or GUS. Manual underwrites are held to the maximum debt ratios of 29% housing and 41% total. There is a debt ratio waiver process for housing ratios between 29% - 32% and total ratios between 41% - 44%. The process is outlined in Administrative Notice 4710 dated 2/28/2013. However, if the loan receives an Accept/Eligible finding through GUS, the debt ratio can generally go as high as 44% without a debt ratio waiver request.
Once you have determined your loan meets GRH program guidelines, your loan must be submitted to RHD for review. There are several forms that must be included in the loan package in addition to credit, income, asset, and appraisal documentation:
· Attachment C – Origination Stacking Order Checklist. This form breaks down what documentation must be submitted to RHD depending on the review type (Manual, GUS, etc.).
· Form RD 1980-21 – Request for Single Family Housing Loan Guarantee. This is the official request form that serves as a loan application and disclosure for the GRH program.
· Attachment A – Worksheet for Calculating Income. Utilize this form to give a detailed explanation of your eligibility and qualifying income calculations. Eligibility income is what RHD will use to determine if the loan is within county limits. This is generally a more aggressive income calculation as it is based on projected earnings. Qualifying income is the traditional income calculation as we know it. For example, this is where we would apply our bi-weekly salary formula for a borrower that is paid every two weeks.
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RHD has several online resources to assist you with learning the eligibility rules and the calculations for the guarantee fees.
· Income and property eligibility:http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?NavKey=...
· USDA Lender Interactive Network Connection (LINC) website for training and job aids:https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do
· The Guaranteed Underwriting System (GUS):https://www.eauth.usda.gov/MainPages/index.aspx
· Underwriting and Loan Closing Documentation Matrix:http://www.rurdev.usda.gov/SupportDocuments/PR_UW_Loan_Closing_Matrix_Do...
· Rural Development Administrative Notices (ANs), which are RHD’s updates to their guidelines: http://www.rurdev.usda.gov/rd-an_list.html
About The Author
Frankie Lacy - As an op-ed writer, Ms. Frankie Lacy is a 15+ year mortgage industry veteran with extensive conventional mortgage underwriting experience. Topics of Frankie's expertise include: Fannie Mae, Freddie Mac, USDA Rural Housing, underwriting to investor overlays, self-employed borrowers, personal and business tax return analysis, rental income, condos/co-ops/PUDs, and more. Frankie is a Davenport University graduate with a degree in Business Administration.
