July 27, 2023 • 28 mins
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One of the major obstacles facing every prospective home buyer is having a downpayment and qualifying for a loan. What many homebuyers may not know is that the US Department of Agriculture has a Single Close Construction to Permanent Loan program that is zero down payment and Guaranteed by the US Department of Agriculture.
Your Favorite Anchorman and Grey Haired Host, Sam Yates, sat down with Ed Peace of the USDA to explore this special program that benefits home buyers, lenders, realtors, and builders.
The Great American Senior Show podcast is produced by Yates & Associates, Public Relations & Marketing. This podcast is part of the network of podcasts streaming under the umbrella of the Pod National News Network. For more information about Yates & Associates or the Pod National News Network, contact Sam Yates at (772) 528-5185 or Sam@Yatespro.com. Sponsorship opportunities are available. The Great American Senior Show is ranked 3rd Best in Senior Podcasts to Follow for 2023 in all podcasts for seniors in a comprehensive survey by feedspot.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Sam Yates (00:11):
Hello, everyone, and welcome to another exciting
edition of The Great AmericanSenior Show with your gray
haired host, Sam Yates. As wehead into our third year of the
great American Senior Show,we're asking our worldwide
audience to drop us a note withyour name, and location. And
we'll give you a shout out. Now,let's find out today's latest
(00:33):
news on The Great AmericanSenior Show. But a little bit of
something different today, wesometimes find a topic of
interest that is multi podcastusable, I'll bet if you tried to
decipher that down, all it meansis that we have a topic that can
be of interest to the FloridaBusiness Forum, our various
(00:55):
builders, associations, oursenior community, and right here
on the great American seniorshow. And generally, information
that is across the board, super,super useful for people and
today is such as that topic. Solike for you to join me in
welcoming Ed piece. He is thefinance and loan analyst, lender
(01:16):
and partner in the activitiesbranch of the US Department of
Agriculture. And specifically,this is a mouthful, the single
family housing Guaranteed LoanProgram under the rural
development arena. So Ediethat's a lot to say. And it
means that you're veryimportant. So I am happy to have
(01:36):
you on the program today.
Ed Peace, USDA, Single Fa (01:38):
Thank you so much, Sam. Glad to be
here and glad to share ourinformation as always.
Sam Yates (01:42):
Well, let's start with what your job is and the
geographic area that that youcover.
Ed Peace, USDA, Single Fam (01:49):
Yes.
So my job specifically is totrain lenders, builders and
realtors on our programs. Weserve some in the national
office, we actually serve thewhole country, every state and
territory. And geographicallyspeaking as well, the any area
that's less than 35,000 inpopulation is considered rural
for our rural housing programs.
Sam Yates (02:13):
And, you know, I think that the, the program
itself was was rather unique.
I'd never heard of it before. Sotell us about the program
itself.
Ed Peace, USDA, Single Fa (02:24):
Yeah, we don't have an advertising
budget. So that's left up topeople like me to get the word
out. So yeah, we think it's animpressive program too. So,
especially when you get allthese features with a no
downpayment requirement. That's,that's the key for the
applicants. We can even have theyou know, most of the loan
closing costs are all the loanclosing costs rolled into the
(02:45):
loan up to the appraised value.
So specifically with the singleclose construction loan, are one
of our guaranteed loan, one ofour USDA approved guaranteed
lenders underwrites and closesthe loan. But immediately after
the loan closing, they canrequest our loan guarantee,
which is the government backingfor that loan, before
(03:06):
construction even begins. Sothat's kind of unique to this
program. There are other onetime closed programs out there
under other other entities, butnobody that I'm aware of issues
there government backing upfront. So just a little bit more
in detail, the constructiondraws right as the house
progresses. And this loanfeature was designed to allow
(03:28):
for reserves for the applicantto establish from loan funds, a
payment reserves so that they'renot having to make rent payment,
and either the interest accruedinterest payment or the full
house payment duringconstruction. So in neither do
does the applicant have to, youknow, secure a construction
(03:48):
loan, and pay closing costs onthat loan, and then turn around
and secure permanent financingand close on that loan and pay
all those loan closing costs aswell. So this this all in one
construction to permanent loansaves everybody time and money.
Sam Yates (04:08):
It has to be popular.
I'm hearing this and I'm goingwow. You know, I know people
that would love to take part inthat safe to say it's very
popular.
Ed Peace, USDA, Single Famil (04:18):
It is it's gaining popularity.
Absolutely.
Sam Yates (04:21):
What about and I did not see this in the information
that I reviewed, is there a maxthere obviously has to be a
maximum or is there a maximumthat could apply for the
program, maximum loan amount
Ed Peace, USDA, Singl (04:35):
regarding loan amount, basically what the
applicant qualifies for so we dohave the income limits that
we'll talk about a little bitlater on. They're under those
income limits and they qualifyfor the loan. There's no set
dollar amount for the loanlimit. We used to have those but
we kind of took it off and saidhey, if the applicant is under
the income limits and they canafford the loan, they can buy
(04:56):
the house. has this program been
Sam Yates (04:58):
around a while or is it Is it brand new.
Ed Peace, USDA, Single Famil (05:01):
So it a little bit of background.
The USDA has been doing housingloans since 1949, Congress
established our ability to do soby the Housing Act of 1949. And
then in so we were doing what wecall direct loans where the
agency does all the originatingprocessing, underwriting, loan
(05:22):
closing Loan Servicing for poorhouseholds that are 80% of
median income or below. That's,that's our direct program. Those
are those loans are subsidizedpayments are subsidized in that
program. In 1991, Congressexpanded that program or
expanded our ability to go forhigher income households. So
(05:42):
now, our guaranteed loans serve115% households of 115% of
median income for the area. Andthen so just four or five years
ago, we added this single closeconstruction loan feature. So
it's only been around for fiveyears.
Sam Yates (06:01):
I think the first time I heard of it was well, as
a matter of fact, when youreached out I had just heard
about it. And I was like thishas to be something that the
building communities ourbuilders are going to be very
interested in lenders andrealtors and realtor four have
adjusted aside on that. BecauseI know realtors are a little bit
stymied right now in affordablehousing, this opens a new venue
(06:26):
for them. And my understandingis if you are a realtor, and
you're working with someone, youdon't wait until everything is
finished and done. Realtors getpaid early.
Ed Peace, USDA, Single F (06:36):
That's right, so at the initial loan
closing, which would typicallybe you know, the construction
loan, that's when Realtors gettheir commission. So they don't
have to wait till the till thepermanent loan is closed and or
even you don't even have to waittill the house is finished. If
they, you know, they can holdthe hand of the African if they
choose to, you know, through theconstruction process, but if
(06:57):
they choose to cut ties and go,go gather some more, you know,
fishing for more applicants,qualified applicants, then they
can certainly do that as well.
So
Sam Yates (07:07):
I want to go into the details and talk about how
people qualify, and inparticular in some of the
highlights of it. But before Iforget, I know that as we go
through this, there are going tobe builders, realtors lenders,
and and the general public thatgoes wow, you know, how do I get
more information? How do they dothat?
Ed Peace, USDA, Single Fam (07:27):
Yes, so applicants really should
contact the USDA approved lenderof their choice. And I can give
the website a little bit lateron there. But lenders builders
and realtors may certainlycontact our my particular loan
division, just as an emailaddress that's s f h that stands
(07:51):
for single family housing, G LD, that stands for guaranteed
loan division. So it's s FHGL ddot lender partner@usda.gov. We
can we can help them?
Sam Yates (08:05):
Absolutely, I would advise the folks who are
monitoring that to stand bybecause I can tell you it will
get busy. Let's let's walkthrough the the program from the
the potential buyer from theperson that is going to look at
this and say, Can I qualify? Howdo I qualify? Walk us through
(08:26):
some of those bullet points.
Ed Peace, USDA, Single Fam (08:27):
Yep, so USDA, all of our housing
programs are driven by maximumhousehold incomes. So we have we
have income limits. And itsounds like it might be very
limiting. But I mentioned awhile ago, we serve households
of 115% of median income. Butthe least maximum income limit
(08:52):
if that makes sense, the lowestmaximum income limit anywhere in
the nation is $110,000. For afamily of one to four people in
the household. If it's if it's ahousehold of five and above that
that lowest maximum is 146,000for the household. So I've heard
it said that four out of fivehousehold households in the us
(09:15):
meet our income limits based onthe most recent census data. So
even though it soundsrestrictive, it's not very
restrictive at all from theapplicant standpoint. So and
they applicants would be unablehave to be unable to qualify for
conventional credit. Since we'renot competing against
conventional lenders. They haveto have acceptable credit
(09:37):
histories. We don't specifycredit score a minimum credit
score, that's up to ourunderwriting lenders to make
prudent loan decisions. Theyhave to have they have to show
repayment ability for our forthat proposed loan. We do that
by looking at a percentage oftheir repayment income that
would take to make the housepayment typically 29% or less of
(10:01):
the of that repayment income,then if you look at all their
debts on a monthly basis thatyou know, typically can't go
over 41% of their repayment. Andwe can go a little bit above
that with compensating factorsif there's, you know, stronger.
If there are more strings in thefile, than there are any
weaknesses, we can, we canpossibly go above those ratios
(10:22):
there. And they have to be a UScitizen or qualified alien, our
handbook spells out the detailson that. And lastly, the
properties have to beresidential in purpose in use
and be in a rural area. Andgenerally, that's towns and
cities in the US that's lessthan 35,000 in population. And,
again, another statistic is thatmore than 90%, I think it's
(10:45):
around 92% of the US landmass isin a eligible area for USDA
Rural Development. And just
Sam Yates (10:55):
for our audience, we are located on the east coast of
Florida. And I just did a randomzip code search throughout our
region, heading over intoCentral Florida, over towards
the west coast. And I found veryfew zip codes that did not have
(11:16):
areas that qualified for this.
So I think though the an areathat did not qualify, it was a
on one of the barrier islandsand it was full of condos. I was
like wow. Yeah, that's sort offigures. But it's pretty
amazing. And I encourageeverybody to look into this.
From the vantage point availablefunds, is this a program that is
(11:37):
going to be indefinite? Or isthere some urgency to if you're
interested? Check it out?
Ed Peace, USDA, Single Fa (11:45):
Well, in No, there's not really any
urgency to it because it'savailable year round. So you
know, we get our funds at thefirst of each fiscal year
starting in October 1. Andtypically, we get enough funds
that lasts through the throughthe whole fiscal year. So So
funds are available year round,typically. Now,
Sam Yates (12:07):
what about it's not not necessarily for first time
buyers, which I noted in there.
So you're eligible, if you meetthe eligibility requirements,
you don't have to be a firsttime buyer.
Ed Peace, USDA, Single (12:19):
Correct?
Correct. People can have owned ahome in the past or very
recently, you don't have to meetany first time homebuyer
requirements. Typically, we saythat, you know, it's only to
provide our applicants, youknow, a residence, one
residence, there are someexceptions, if they get moved on
their job and can sharerepayment for both houses, they
(12:40):
might be able to retain anotherhouse, then yeah, this is for
owner occupied principalresidence is no no financing of
second homes or anything likethat.
Sam Yates (12:50):
No, how long do they have to live in the house?
Because I could probably seethat somebody would go, Wow,
that's a great opportunity toget in on something at a great
price market changes, and I can,you know, move on up.
Ed Peace, USDA, Single F (13:02):
Right, USDA does not specify anytime of
any any timeframe, minimumtimeframe that they have to be
in the house before they sell.
So it's open ended there.
Sam Yates (13:11):
Wow. So I think that will the state of the market
today. That's probably anotherbig selling point. The the point
of getting this all done inadvance, how attractive should
that be to a builder forexample?
Ed Peace, USDA, Single Fam (13:32):
Yes, so builders, you know, the
advantage for the single closeconstruction loan for the
builders is that you know, thethe loan funds are going to be
drawn down for constructiondraws. So it's actually on the
applicants dime and not on thebuilders dime to build the
house. So they don't have to usetheir lines of credit or any of
their, you know, assets orfinances. So it's going to be
(13:55):
drawn down from loan funds. Andwhen so they
Sam Yates (13:57):
don't have to put don't have to put their money
up. Right.
Ed Peace, USDA, Single (14:00):
Exactly.
And it'll be the typicalinspections that they have from
the county or city.
Sam Yates (14:06):
Yeah. From let's let's take a look at the the
financial institutions who wantto get in on this. So you're not
competing with them, you'reoffering them something that
they may not have in theirportfolio. Absolutely. So that's
a great way to expand theirclient base offering the no down
payment program.
Ed Peace, USDA, Single Fami (14:26):
You know, and they get that
government backing on thisconstruction loan up front
before construction even begins,which mitigates a lot of the
inherent risk in a constructionproject. So, Heaven Heaven, you
know, heaven help us if the iflong failed during construction,
but if they did, if that did youknow we would ask the lender to
(14:51):
finish the house, try to marketit and sell it and if they
experienced a loss even afterdoing all that then then USDA
standards ready, willing andable to make good on that
government guarantee?
Sam Yates (15:03):
Just based on the screening criteria, though? I
would I would imagine if thateven happens, it's a very, very
small percentage.
Ed Peace, USDA, Single Family (15:11):
I don't know that it has happened.
Yeah.
Sam Yates (15:13):
Awesome. Awesome.
What would you say is the thesingle most attractive? If we
look at builder, lender,realtor, what is the most single
thing that they're all going tohave this aha moment about just
attracting
Ed Peace, USDA, Single Fam (15:30):
more clients with a no downpayment
program? You know, so, in myworld, probably the two biggest
hurdles that keep people frombuying a house and were building
a house would be the lack offunds for downpayment from
conventional loan, thisaddresses that, and credit
issues, you know, having creditproblems. So with our flexible
(15:51):
credit underwriting, we think weaddress a lot of those issues as
well.
Sam Yates (15:56):
What does the lender that have to do to qualify
there? I mean, we know what thebuyer has to do, but what does
the the lender have to do toqualify that?
Ed Peace, USDA, Single Fa (16:05):
Yeah, great question. So for for
lenders to qualify toparticipate, they have to be
USDA approved, which, you know,they go through the approval
process, but once they once theyare USDA approved, they only
have to have two yearsexperience in construction
loans, managing and makingconstruction loans. And the
(16:26):
builders that they approved forthis program also have to have
two years experience inconstructing Single Family
Housing residences.
Sam Yates (16:34):
And that was my next question for the builders, the
the number of people moving toFlorida, I forget exactly how
much it is, it's like in the1000s per month, this would seem
to be something that that shouldopen up a lot of new areas of
35,000 people or less in thecommunity. I would really think
(16:58):
that this could be a hugeopportunity for people moving to
the Sunshine State.
Ed Peace, USDA, Sin (17:03):
Absolutely.
I agree. Yep.
Sam Yates (17:07):
When you get into this walk, how walk me through
the process, how does itoperate? If I let's say I find a
a piece of property. And and Iguess a good question to ask on
on the property. Is there alimit to the size of the
property? I know, in some of therural areas I was looking at? It
(17:28):
was rural areas, starting withan acre, some of them were five
acres? What about the size ofthe property?
Ed Peace, USDA, Single Fa (17:35):
Great question. We don't USDA does not
limit the size of the propertyjust has some typical for the
area for residential uses. So ifit's so if an area if a county
is typical, you know, to havethree or four acres as a home
site, or even five or six acres,you know, that's that's what we
go with. The appraiser basicallyidentifies what is typical for
(17:56):
that area. And I think that's
Sam Yates (17:59):
a great way to look at it because I know and without
naming the county in one of ouradjoining counties, it is very
rural, there's a lot of ranchinggoing on. And those ranchers as
they sell off property, theydon't sell them off and little
drips and at all, they sellmaybe 10 or 20 acre plot and go
(18:21):
from there. So it wouldtechnically qualify if the
person qualifies.
Ed Peace, USDA, Single Famil (18:25):
If the appraiser said that was
typical for the area. That'sright. Yeah. How long does the
entire Oh, back to the back tothe property itself?
Sam Yates (18:34):
The property itself it the loan covers the purchase
of the property building of thehouse, even down to landscaping?
Oh, absolutely.
Ed Peace, USDA, Sin (18:44):
Absolutely.
That's basically the only thingis everything, everything
associated with building a houseas far as you know, building the
dwelling itself, the septictank, if required, the well if
required, driveways,landscaping, we don't we don't
allow financing of you know,movable items such as furniture,
that type of thing. Typicaltypical appliances such as
(19:04):
Washington dryers, mayberefrigerators, you know, built
in ovens built in microwaves,obviously those would be but but
that's about where it's limited.
Okay,
Sam Yates (19:18):
how long does the process take? A good question.
Ed Peace, USDA, Single Famil (19:22):
So once a lender so from the
applicant standpoint, when anapplicant applies with a lender,
then the lender does theirtypical originating process is
underwriting processes. So oncethey get ready to request a
government guarantee of USDA,they they send us the the loan
package, then we take taketypically two business days to
(19:46):
up to two business days to doour review and give our blessing
or require more information tothe lender. So from the outcome
standpoint, it takes about twomore business days than what it
would without USDA a while, butwhat are you getting for those
two days, you're getting nodownpayment and all the bells
and whistles that we'vementioned.
Sam Yates (20:05):
But that's still incredibly streamlined. When you
stop and think about whathappens in a normal home buying
situation. That's just, it's alittle mind boggling to be quite
honest that it could happen thatquickly. We've We've
Ed Peace, USDA, Single Fa (20:18):
spent many years trying to fine tune
the process.
Sam Yates (20:23):
How many people have taken advantage of this program?
Just any general statistics? Oh,wow.
Ed Peace, USDA, Single Famil (20:31):
So every year we we get funding of
around $24 billion nationwide.
So we came close a couple ofyears ago of spending the whole
24 billion. So number wise onapplicants, you know, it's in
the 10s of 1000s per per year,so. So it's gaining in
popularity, a lot of peopledon't know about it, like you've
(20:54):
said early, we're gonna do
Sam Yates (20:57):
our part to make sure that they do know about it.
Question from a builder'svantage point, because this is
something that I hear when I'msitting in on board meetings,
and that is the price ofconstruction materials from the
time of project starts until thetime a project ends,
construction materials,historically, they may be
(21:19):
changing now, but historically,the last couple of years have
gone through the roof. No punintended, how is that addressed?
Ed Peace, USDA, Single Fam (21:28):
Yes, so there are contingency
reserves, for it for increasedcosts or increased project
scope. So we do have acontingency reserve of up to 10%
that can even be rolled into theloan. So all of our loan closing
costs can go up to 100% of theappraised value, whatever,
(21:50):
whatever calls can be rolledinto that loan up to that
appraised value is eligible, orare eligible loan purposes,
including that 10% contingencyreserve. So if their call stack
runs, they can pull out of thatcontingency reserve.
Sam Yates (22:04):
Yeah, I want my builder friends to to not go Oh,
change order. So it's not that,you know, that's not something
that we're talking about here.
We're talking about actual costcosts. Exactly. Yep. Earlier, we
mentioned how people could getmore information. And before we
wrap up the program today,again, how can they reach out
both from the consumerstandpoint, then the lender
(22:26):
builder realtor
Ed Peace, USDA, Single Fam (22:30):
good questions. So our URL was kind
of long, so I chose not to tryto read it off. But if folks
will go to www.rd.usda.gov in aslash programs, dash services,
so that'll take you to ourwebsite, and then click on
single family housing programson the left menu. And there you
(22:55):
you'll see all of our housingprograms, our direct loans I
mentioned earlier, which aresubsidized loans, repair loans
and grants for homeowners thatare in need of repairs, we have
grants available up to $10,000for elderly households that to
remove health and safetyhazards, so but our program for
the single family housingGuaranteed Loan Program is there
(23:15):
as well. And there are tabs atthe top for overview to apply.
That's where the list of USDAapproved lenders is under the
Apply tab. And we also have aseparate list of lenders that
are participating in the singleclosed construction loan feature
as well. And so, like I said, Ifinterested, the applicants
(23:40):
themselves should probablycontact the USDA approved lender
of their choice and, you know,get all their questions answered
there. Be sure to ask forsomebody for the person who is
familiar with USDA, because somelenders even though they offer
our program, not everybodywithin that lender might know
the details of our program.
Sam Yates (24:00):
And I think that's important because I was chatting
with someone who is in themortgage industry just a few
days ago and asked him Are therequalifying are qualified areas
in in our particular county, andthis person without identifying
who it is, or male or femalesaid, Oh, no. And I was like,
(24:21):
really? Let me show you and pullit up. And they were quite
amazed. And, you know, it wassimply because they weren't not
familiar with the program. Andin some respect, I think they
equated it to low incomehousing. And that's not the case
at all. So it depends on beingfamiliar with the program to as
(24:44):
a lender.
Ed Peace, USDA, Sin (24:45):
Absolutely.
Absolutely. You know, the directprogram has been around for 5060
years. So sometimes in someareas, that's the only program
people are aware of. So yes,good job. They're saying
Sam Yates (24:59):
no, I I'm advocating for it because I believe in it.
Along that same line, if thereare qualifying qualified areas
that zip codes, they do not haveto necessarily be in an rural
area only it can be within avillage or within a city limit
(25:19):
as long as it meets therequirements.
Ed Peace, USDA, Single F (25:22):
That's right. Yes. So by rural it
doesn't necessarily mean ascattered site with no
development around. We do many,many houses are within a
subdivision and the subdivisionis located within a rural area.
Yeah, that's a good question.
Sam Yates (25:35):
I wanted to make sure I underscore that because that
seems to be a growing area forour residents here in
particular. And is thereanything that we did not touch
upon, that our audience needs toknow about?
Ed Peace, USDA, Single Fami (25:48):
She know, I could probably go on for
days, but I think we coveredmost of the most of the
highlights of the program. Soyou know, excited to get more
people involved. I tell you onething, Sam, I did do a podcast
the other day where the hostsaid she was going to go, she
was located in a rural area,thought she may qualify, she was
going to go get her loan, Isaid, well listen to this. Back
(26:09):
in 1994, three years after theguarantee day program started, I
was going around marketing theprogram and going home to my
little rental unit thinking, youknow, we've always wanted to buy
a house, but I don't know, wejust didn't have the
downpayment. Now if I've gotgood credit, I've got you know,
stable income, I wonder if I canqualify and long story short, we
(26:30):
built our very first house underthe USDA Rural Development
Program, back then we didn'thave the single clothes feature,
I wish we had to save me somemoney. But so I'm a living
breathing example of the successof that program, you know, we
closed on it, you're a few yearslater, we're able to refinance
into the conventional world. Andyou know, so that kind of was
(26:51):
able to get us our start kind ofour foothold, and kind of moved
us along and gave somebody elsethe chance to get started. So,
you know,
Sam Yates (26:59):
that's, that's a great way of describing it. And,
you know, I have to be honest, Ihave thought of, of looking into
it, we just recently purchased ahouse. So it's like, wow, I wish
I'd have known about this, youknow, two years ago, for
example, but sometimes you learnfrom the things that you do so
and I want to thank you again,for being here on the program.
One question for you is thatit's a very simple question.
(27:25):
Would you be able to come backat some point in the future as
there are new developments tothe program or as we get into a
new fiscal year to come back andand recap some of these things?
Because I think they bearrepeating.
Ed Peace, USDA, Sin (27:38):
Absolutely, Sam would love to be able to do
so. All right,
Sam Yates (27:41):
ladies and gentlemen, my guest today, Ed piece, and
I'm going to read out his titlebecause it is an impressive
title, finance and loan analyst,lender and partner activities
branch out of the DC area. But Ihave to tell you, he's not in
DC, single family housing,guaranteed loan programs, rural
development. But as we heardthat this is not limited to just
(28:04):
rural areas with the USDepartment of Agriculture. And
that is a mouthful, but it iscertainly something that I want
you all to remember, so that youcan reach out when you need
help, because it's a greatprogram.
Ed Peace, USDA, Single Famil (28:18):
We think so. Thanks. Thanks for
being here.
Sam Yates (28:22):
Have a great day, everybody. And we'll update you
on this as there are newdevelopments. Thanks for
listening to the great Americansenior show, America's favorite
podcast devoted to the healthwelfare, education and
information for seniors of allages. Our audience has grown
into the 1000s Thanks to loyallisteners just like you.
(28:43):
Remember the great Americansenior show for the news you
need to know Have a great dayeverybody
Hello, everyone, and welcome to another exciting
edition of The Great AmericanSenior Show with your gray
haired host, Sam Yates. As wehead into our third year of the
great American Senior Show,we're asking our worldwide
audience to drop us a note withyour name, and location. And
we'll give you a shout out. Now,let's find out today's latest
(00:33):
news on The Great AmericanSenior Show. But a little bit of
something different today, wesometimes find a topic of
interest that is multi podcastusable, I'll bet if you tried to
decipher that down, all it meansis that we have a topic that can
be of interest to the FloridaBusiness Forum, our various
(00:55):
builders, associations, oursenior community, and right here
on the great American seniorshow. And generally, information
that is across the board, super,super useful for people and
today is such as that topic. Solike for you to join me in
welcoming Ed piece. He is thefinance and loan analyst, lender
(01:16):
and partner in the activitiesbranch of the US Department of
Agriculture. And specifically,this is a mouthful, the single
family housing Guaranteed LoanProgram under the rural
development arena. So Ediethat's a lot to say. And it
means that you're veryimportant. So I am happy to have
(01:36):
you on the program today.
Ed Peace, USDA, Single Fa (01:38):
Thank you so much, Sam. Glad to be
here and glad to share ourinformation as always.
Sam Yates (01:42):
Well, let's start with what your job is and the
geographic area that that youcover.
Ed Peace, USDA, Single Fam (01:49):
Yes.
So my job specifically is totrain lenders, builders and
realtors on our programs. Weserve some in the national
office, we actually serve thewhole country, every state and
territory. And geographicallyspeaking as well, the any area
that's less than 35,000 inpopulation is considered rural
for our rural housing programs.
Sam Yates (02:13):
And, you know, I think that the, the program
itself was was rather unique.
I'd never heard of it before. Sotell us about the program
itself.
Ed Peace, USDA, Single Fa (02:24):
Yeah, we don't have an advertising
budget. So that's left up topeople like me to get the word
out. So yeah, we think it's animpressive program too. So,
especially when you get allthese features with a no
downpayment requirement. That's,that's the key for the
applicants. We can even have theyou know, most of the loan
closing costs are all the loanclosing costs rolled into the
(02:45):
loan up to the appraised value.
So specifically with the singleclose construction loan, are one
of our guaranteed loan, one ofour USDA approved guaranteed
lenders underwrites and closesthe loan. But immediately after
the loan closing, they canrequest our loan guarantee,
which is the government backingfor that loan, before
(03:06):
construction even begins. Sothat's kind of unique to this
program. There are other onetime closed programs out there
under other other entities, butnobody that I'm aware of issues
there government backing upfront. So just a little bit more
in detail, the constructiondraws right as the house
progresses. And this loanfeature was designed to allow
(03:28):
for reserves for the applicantto establish from loan funds, a
payment reserves so that they'renot having to make rent payment,
and either the interest accruedinterest payment or the full
house payment duringconstruction. So in neither do
does the applicant have to, youknow, secure a construction
(03:48):
loan, and pay closing costs onthat loan, and then turn around
and secure permanent financingand close on that loan and pay
all those loan closing costs aswell. So this this all in one
construction to permanent loansaves everybody time and money.
Sam Yates (04:08):
It has to be popular.
I'm hearing this and I'm goingwow. You know, I know people
that would love to take part inthat safe to say it's very
popular.
Ed Peace, USDA, Single Famil (04:18):
It is it's gaining popularity.
Absolutely.
Sam Yates (04:21):
What about and I did not see this in the information
that I reviewed, is there a maxthere obviously has to be a
maximum or is there a maximumthat could apply for the
program, maximum loan amount
Ed Peace, USDA, Singl (04:35):
regarding loan amount, basically what the
applicant qualifies for so we dohave the income limits that
we'll talk about a little bitlater on. They're under those
income limits and they qualifyfor the loan. There's no set
dollar amount for the loanlimit. We used to have those but
we kind of took it off and saidhey, if the applicant is under
the income limits and they canafford the loan, they can buy
(04:56):
the house. has this program been
Sam Yates (04:58):
around a while or is it Is it brand new.
Ed Peace, USDA, Single Famil (05:01):
So it a little bit of background.
The USDA has been doing housingloans since 1949, Congress
established our ability to do soby the Housing Act of 1949. And
then in so we were doing what wecall direct loans where the
agency does all the originatingprocessing, underwriting, loan
(05:22):
closing Loan Servicing for poorhouseholds that are 80% of
median income or below. That's,that's our direct program. Those
are those loans are subsidizedpayments are subsidized in that
program. In 1991, Congressexpanded that program or
expanded our ability to go forhigher income households. So
(05:42):
now, our guaranteed loans serve115% households of 115% of
median income for the area. Andthen so just four or five years
ago, we added this single closeconstruction loan feature. So
it's only been around for fiveyears.
Sam Yates (06:01):
I think the first time I heard of it was well, as
a matter of fact, when youreached out I had just heard
about it. And I was like thishas to be something that the
building communities ourbuilders are going to be very
interested in lenders andrealtors and realtor four have
adjusted aside on that. BecauseI know realtors are a little bit
stymied right now in affordablehousing, this opens a new venue
(06:26):
for them. And my understandingis if you are a realtor, and
you're working with someone, youdon't wait until everything is
finished and done. Realtors getpaid early.
Ed Peace, USDA, Single F (06:36):
That's right, so at the initial loan
closing, which would typicallybe you know, the construction
loan, that's when Realtors gettheir commission. So they don't
have to wait till the till thepermanent loan is closed and or
even you don't even have to waittill the house is finished. If
they, you know, they can holdthe hand of the African if they
choose to, you know, through theconstruction process, but if
(06:57):
they choose to cut ties and go,go gather some more, you know,
fishing for more applicants,qualified applicants, then they
can certainly do that as well.
So
Sam Yates (07:07):
I want to go into the details and talk about how
people qualify, and inparticular in some of the
highlights of it. But before Iforget, I know that as we go
through this, there are going tobe builders, realtors lenders,
and and the general public thatgoes wow, you know, how do I get
more information? How do they dothat?
Ed Peace, USDA, Single Fam (07:27):
Yes, so applicants really should
contact the USDA approved lenderof their choice. And I can give
the website a little bit lateron there. But lenders builders
and realtors may certainlycontact our my particular loan
division, just as an emailaddress that's s f h that stands
(07:51):
for single family housing, G LD, that stands for guaranteed
loan division. So it's s FHGL ddot lender partner@usda.gov. We
can we can help them?
Sam Yates (08:05):
Absolutely, I would advise the folks who are
monitoring that to stand bybecause I can tell you it will
get busy. Let's let's walkthrough the the program from the
the potential buyer from theperson that is going to look at
this and say, Can I qualify? Howdo I qualify? Walk us through
(08:26):
some of those bullet points.
Ed Peace, USDA, Single Fam (08:27):
Yep, so USDA, all of our housing
programs are driven by maximumhousehold incomes. So we have we
have income limits. And itsounds like it might be very
limiting. But I mentioned awhile ago, we serve households
of 115% of median income. Butthe least maximum income limit
(08:52):
if that makes sense, the lowestmaximum income limit anywhere in
the nation is $110,000. For afamily of one to four people in
the household. If it's if it's ahousehold of five and above that
that lowest maximum is 146,000for the household. So I've heard
it said that four out of fivehousehold households in the us
(09:15):
meet our income limits based onthe most recent census data. So
even though it soundsrestrictive, it's not very
restrictive at all from theapplicant standpoint. So and
they applicants would be unablehave to be unable to qualify for
conventional credit. Since we'renot competing against
conventional lenders. They haveto have acceptable credit
(09:37):
histories. We don't specifycredit score a minimum credit
score, that's up to ourunderwriting lenders to make
prudent loan decisions. Theyhave to have they have to show
repayment ability for our forthat proposed loan. We do that
by looking at a percentage oftheir repayment income that
would take to make the housepayment typically 29% or less of
(10:01):
the of that repayment income,then if you look at all their
debts on a monthly basis thatyou know, typically can't go
over 41% of their repayment. Andwe can go a little bit above
that with compensating factorsif there's, you know, stronger.
If there are more strings in thefile, than there are any
weaknesses, we can, we canpossibly go above those ratios
(10:22):
there. And they have to be a UScitizen or qualified alien, our
handbook spells out the detailson that. And lastly, the
properties have to beresidential in purpose in use
and be in a rural area. Andgenerally, that's towns and
cities in the US that's lessthan 35,000 in population. And,
again, another statistic is thatmore than 90%, I think it's
(10:45):
around 92% of the US landmass isin a eligible area for USDA
Rural Development. And just
Sam Yates (10:55):
for our audience, we are located on the east coast of
Florida. And I just did a randomzip code search throughout our
region, heading over intoCentral Florida, over towards
the west coast. And I found veryfew zip codes that did not have
(11:16):
areas that qualified for this.
So I think though the an areathat did not qualify, it was a
on one of the barrier islandsand it was full of condos. I was
like wow. Yeah, that's sort offigures. But it's pretty
amazing. And I encourageeverybody to look into this.
From the vantage point availablefunds, is this a program that is
(11:37):
going to be indefinite? Or isthere some urgency to if you're
interested? Check it out?
Ed Peace, USDA, Single Fa (11:45):
Well, in No, there's not really any
urgency to it because it'savailable year round. So you
know, we get our funds at thefirst of each fiscal year
starting in October 1. Andtypically, we get enough funds
that lasts through the throughthe whole fiscal year. So So
funds are available year round,typically. Now,
Sam Yates (12:07):
what about it's not not necessarily for first time
buyers, which I noted in there.
So you're eligible, if you meetthe eligibility requirements,
you don't have to be a firsttime buyer.
Ed Peace, USDA, Single (12:19):
Correct?
Correct. People can have owned ahome in the past or very
recently, you don't have to meetany first time homebuyer
requirements. Typically, we saythat, you know, it's only to
provide our applicants, youknow, a residence, one
residence, there are someexceptions, if they get moved on
their job and can sharerepayment for both houses, they
(12:40):
might be able to retain anotherhouse, then yeah, this is for
owner occupied principalresidence is no no financing of
second homes or anything likethat.
Sam Yates (12:50):
No, how long do they have to live in the house?
Because I could probably seethat somebody would go, Wow,
that's a great opportunity toget in on something at a great
price market changes, and I can,you know, move on up.
Ed Peace, USDA, Single F (13:02):
Right, USDA does not specify anytime of
any any timeframe, minimumtimeframe that they have to be
in the house before they sell.
So it's open ended there.
Sam Yates (13:11):
Wow. So I think that will the state of the market
today. That's probably anotherbig selling point. The the point
of getting this all done inadvance, how attractive should
that be to a builder forexample?
Ed Peace, USDA, Single Fam (13:32):
Yes, so builders, you know, the
advantage for the single closeconstruction loan for the
builders is that you know, thethe loan funds are going to be
drawn down for constructiondraws. So it's actually on the
applicants dime and not on thebuilders dime to build the
house. So they don't have to usetheir lines of credit or any of
their, you know, assets orfinances. So it's going to be
(13:55):
drawn down from loan funds. Andwhen so they
Sam Yates (13:57):
don't have to put don't have to put their money
up. Right.
Ed Peace, USDA, Single (14:00):
Exactly.
And it'll be the typicalinspections that they have from
the county or city.
Sam Yates (14:06):
Yeah. From let's let's take a look at the the
financial institutions who wantto get in on this. So you're not
competing with them, you'reoffering them something that
they may not have in theirportfolio. Absolutely. So that's
a great way to expand theirclient base offering the no down
payment program.
Ed Peace, USDA, Single Fami (14:26):
You know, and they get that
government backing on thisconstruction loan up front
before construction even begins,which mitigates a lot of the
inherent risk in a constructionproject. So, Heaven Heaven, you
know, heaven help us if the iflong failed during construction,
but if they did, if that did youknow we would ask the lender to
(14:51):
finish the house, try to marketit and sell it and if they
experienced a loss even afterdoing all that then then USDA
standards ready, willing andable to make good on that
government guarantee?
Sam Yates (15:03):
Just based on the screening criteria, though? I
would I would imagine if thateven happens, it's a very, very
small percentage.
Ed Peace, USDA, Single Family (15:11):
I don't know that it has happened.
Yeah.
Sam Yates (15:13):
Awesome. Awesome.
What would you say is the thesingle most attractive? If we
look at builder, lender,realtor, what is the most single
thing that they're all going tohave this aha moment about just
attracting
Ed Peace, USDA, Single Fam (15:30):
more clients with a no downpayment
program? You know, so, in myworld, probably the two biggest
hurdles that keep people frombuying a house and were building
a house would be the lack offunds for downpayment from
conventional loan, thisaddresses that, and credit
issues, you know, having creditproblems. So with our flexible
(15:51):
credit underwriting, we think weaddress a lot of those issues as
well.
Sam Yates (15:56):
What does the lender that have to do to qualify
there? I mean, we know what thebuyer has to do, but what does
the the lender have to do toqualify that?
Ed Peace, USDA, Single Fa (16:05):
Yeah, great question. So for for
lenders to qualify toparticipate, they have to be
USDA approved, which, you know,they go through the approval
process, but once they once theyare USDA approved, they only
have to have two yearsexperience in construction
loans, managing and makingconstruction loans. And the
(16:26):
builders that they approved forthis program also have to have
two years experience inconstructing Single Family
Housing residences.
Sam Yates (16:34):
And that was my next question for the builders, the
the number of people moving toFlorida, I forget exactly how
much it is, it's like in the1000s per month, this would seem
to be something that that shouldopen up a lot of new areas of
35,000 people or less in thecommunity. I would really think
(16:58):
that this could be a hugeopportunity for people moving to
the Sunshine State.
Ed Peace, USDA, Sin (17:03):
Absolutely.
I agree. Yep.
Sam Yates (17:07):
When you get into this walk, how walk me through
the process, how does itoperate? If I let's say I find a
a piece of property. And and Iguess a good question to ask on
on the property. Is there alimit to the size of the
property? I know, in some of therural areas I was looking at? It
(17:28):
was rural areas, starting withan acre, some of them were five
acres? What about the size ofthe property?
Ed Peace, USDA, Single Fa (17:35):
Great question. We don't USDA does not
limit the size of the propertyjust has some typical for the
area for residential uses. So ifit's so if an area if a county
is typical, you know, to havethree or four acres as a home
site, or even five or six acres,you know, that's that's what we
go with. The appraiser basicallyidentifies what is typical for
(17:56):
that area. And I think that's
Sam Yates (17:59):
a great way to look at it because I know and without
naming the county in one of ouradjoining counties, it is very
rural, there's a lot of ranchinggoing on. And those ranchers as
they sell off property, theydon't sell them off and little
drips and at all, they sellmaybe 10 or 20 acre plot and go
(18:21):
from there. So it wouldtechnically qualify if the
person qualifies.
Ed Peace, USDA, Single Famil (18:25):
If the appraiser said that was
typical for the area. That'sright. Yeah. How long does the
entire Oh, back to the back tothe property itself?
Sam Yates (18:34):
The property itself it the loan covers the purchase
of the property building of thehouse, even down to landscaping?
Oh, absolutely.
Ed Peace, USDA, Sin (18:44):
Absolutely.
That's basically the only thingis everything, everything
associated with building a houseas far as you know, building the
dwelling itself, the septictank, if required, the well if
required, driveways,landscaping, we don't we don't
allow financing of you know,movable items such as furniture,
that type of thing. Typicaltypical appliances such as
(19:04):
Washington dryers, mayberefrigerators, you know, built
in ovens built in microwaves,obviously those would be but but
that's about where it's limited.
Okay,
Sam Yates (19:18):
how long does the process take? A good question.
Ed Peace, USDA, Single Famil (19:22):
So once a lender so from the
applicant standpoint, when anapplicant applies with a lender,
then the lender does theirtypical originating process is
underwriting processes. So oncethey get ready to request a
government guarantee of USDA,they they send us the the loan
package, then we take taketypically two business days to
(19:46):
up to two business days to doour review and give our blessing
or require more information tothe lender. So from the outcome
standpoint, it takes about twomore business days than what it
would without USDA a while, butwhat are you getting for those
two days, you're getting nodownpayment and all the bells
and whistles that we'vementioned.
Sam Yates (20:05):
But that's still incredibly streamlined. When you
stop and think about whathappens in a normal home buying
situation. That's just, it's alittle mind boggling to be quite
honest that it could happen thatquickly. We've We've
Ed Peace, USDA, Single Fa (20:18):
spent many years trying to fine tune
the process.
Sam Yates (20:23):
How many people have taken advantage of this program?
Just any general statistics? Oh,wow.
Ed Peace, USDA, Single Famil (20:31):
So every year we we get funding of
around $24 billion nationwide.
So we came close a couple ofyears ago of spending the whole
24 billion. So number wise onapplicants, you know, it's in
the 10s of 1000s per per year,so. So it's gaining in
popularity, a lot of peopledon't know about it, like you've
(20:54):
said early, we're gonna do
Sam Yates (20:57):
our part to make sure that they do know about it.
Question from a builder'svantage point, because this is
something that I hear when I'msitting in on board meetings,
and that is the price ofconstruction materials from the
time of project starts until thetime a project ends,
construction materials,historically, they may be
(21:19):
changing now, but historically,the last couple of years have
gone through the roof. No punintended, how is that addressed?
Ed Peace, USDA, Single Fam (21:28):
Yes, so there are contingency
reserves, for it for increasedcosts or increased project
scope. So we do have acontingency reserve of up to 10%
that can even be rolled into theloan. So all of our loan closing
costs can go up to 100% of theappraised value, whatever,
(21:50):
whatever calls can be rolledinto that loan up to that
appraised value is eligible, orare eligible loan purposes,
including that 10% contingencyreserve. So if their call stack
runs, they can pull out of thatcontingency reserve.
Sam Yates (22:04):
Yeah, I want my builder friends to to not go Oh,
change order. So it's not that,you know, that's not something
that we're talking about here.
We're talking about actual costcosts. Exactly. Yep. Earlier, we
mentioned how people could getmore information. And before we
wrap up the program today,again, how can they reach out
both from the consumerstandpoint, then the lender
(22:26):
builder realtor
Ed Peace, USDA, Single Fam (22:30):
good questions. So our URL was kind
of long, so I chose not to tryto read it off. But if folks
will go to www.rd.usda.gov in aslash programs, dash services,
so that'll take you to ourwebsite, and then click on
single family housing programson the left menu. And there you
(22:55):
you'll see all of our housingprograms, our direct loans I
mentioned earlier, which aresubsidized loans, repair loans
and grants for homeowners thatare in need of repairs, we have
grants available up to $10,000for elderly households that to
remove health and safetyhazards, so but our program for
the single family housingGuaranteed Loan Program is there
(23:15):
as well. And there are tabs atthe top for overview to apply.
That's where the list of USDAapproved lenders is under the
Apply tab. And we also have aseparate list of lenders that
are participating in the singleclosed construction loan feature
as well. And so, like I said, Ifinterested, the applicants
(23:40):
themselves should probablycontact the USDA approved lender
of their choice and, you know,get all their questions answered
there. Be sure to ask forsomebody for the person who is
familiar with USDA, because somelenders even though they offer
our program, not everybodywithin that lender might know
the details of our program.
Sam Yates (24:00):
And I think that's important because I was chatting
with someone who is in themortgage industry just a few
days ago and asked him Are therequalifying are qualified areas
in in our particular county, andthis person without identifying
who it is, or male or femalesaid, Oh, no. And I was like,
(24:21):
really? Let me show you and pullit up. And they were quite
amazed. And, you know, it wassimply because they weren't not
familiar with the program. Andin some respect, I think they
equated it to low incomehousing. And that's not the case
at all. So it depends on beingfamiliar with the program to as
(24:44):
a lender.
Ed Peace, USDA, Sin (24:45):
Absolutely.
Absolutely. You know, the directprogram has been around for 5060
years. So sometimes in someareas, that's the only program
people are aware of. So yes,good job. They're saying
Sam Yates (24:59):
no, I I'm advocating for it because I believe in it.
Along that same line, if thereare qualifying qualified areas
that zip codes, they do not haveto necessarily be in an rural
area only it can be within avillage or within a city limit
(25:19):
as long as it meets therequirements.
Ed Peace, USDA, Single F (25:22):
That's right. Yes. So by rural it
doesn't necessarily mean ascattered site with no
development around. We do many,many houses are within a
subdivision and the subdivisionis located within a rural area.
Yeah, that's a good question.
Sam Yates (25:35):
I wanted to make sure I underscore that because that
seems to be a growing area forour residents here in
particular. And is thereanything that we did not touch
upon, that our audience needs toknow about?
Ed Peace, USDA, Single Fami (25:48):
She know, I could probably go on for
days, but I think we coveredmost of the most of the
highlights of the program. Soyou know, excited to get more
people involved. I tell you onething, Sam, I did do a podcast
the other day where the hostsaid she was going to go, she
was located in a rural area,thought she may qualify, she was
going to go get her loan, Isaid, well listen to this. Back
(26:09):
in 1994, three years after theguarantee day program started, I
was going around marketing theprogram and going home to my
little rental unit thinking, youknow, we've always wanted to buy
a house, but I don't know, wejust didn't have the
downpayment. Now if I've gotgood credit, I've got you know,
stable income, I wonder if I canqualify and long story short, we
(26:30):
built our very first house underthe USDA Rural Development
Program, back then we didn'thave the single clothes feature,
I wish we had to save me somemoney. But so I'm a living
breathing example of the successof that program, you know, we
closed on it, you're a few yearslater, we're able to refinance
into the conventional world. Andyou know, so that kind of was
(26:51):
able to get us our start kind ofour foothold, and kind of moved
us along and gave somebody elsethe chance to get started. So,
you know,
Sam Yates (26:59):
that's, that's a great way of describing it. And,
you know, I have to be honest, Ihave thought of, of looking into
it, we just recently purchased ahouse. So it's like, wow, I wish
I'd have known about this, youknow, two years ago, for
example, but sometimes you learnfrom the things that you do so
and I want to thank you again,for being here on the program.
One question for you is thatit's a very simple question.
(27:25):
Would you be able to come backat some point in the future as
there are new developments tothe program or as we get into a
new fiscal year to come back andand recap some of these things?
Because I think they bearrepeating.
Ed Peace, USDA, Sin (27:38):
Absolutely, Sam would love to be able to do
so. All right,
Sam Yates (27:41):
ladies and gentlemen, my guest today, Ed piece, and
I'm going to read out his titlebecause it is an impressive
title, finance and loan analyst,lender and partner activities
branch out of the DC area. But Ihave to tell you, he's not in
DC, single family housing,guaranteed loan programs, rural
development. But as we heardthat this is not limited to just
(28:04):
rural areas with the USDepartment of Agriculture. And
that is a mouthful, but it iscertainly something that I want
you all to remember, so that youcan reach out when you need
help, because it's a greatprogram.
Ed Peace, USDA, Single Famil (28:18):
We think so. Thanks. Thanks for
being here.
Sam Yates (28:22):
Have a great day, everybody. And we'll update you
on this as there are newdevelopments. Thanks for
listening to the great Americansenior show, America's favorite
podcast devoted to the healthwelfare, education and
information for seniors of allages. Our audience has grown
into the 1000s Thanks to loyallisteners just like you.
(28:43):
Remember the great Americansenior show for the news you
need to know Have a great dayeverybody
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