A quick update to the report we shared September 29th involving USDA’s no-down-payment loans for homes in the Birmingham and Shelby Co. area…
While USDA has announced that its loans will continue beyond the earlier announced September 30th cutoff date, the Agency now says processing of all loans is frozen because of the federal government’s October 1st shutdown.
This also means that the extension beyond September 30th is on hold, as well, until Congress gets the government going again.
If you’re wanting to buy a home with no-down-payment financing in the meantime, we’d recommend contacting some of the Lenders we know in the area who have experience helping people obtain these kind of mortgages and who know about possible alternatives to USDA.
Self-employed people who are applying for loans for home purchases are likely to be affected by the shutdown, as well. That’s because Lenders won’t be able to get tax transmittals from the Internal Revenue Service to help verify income.
Good news if you’re looking to buy a home in several areas close to Birmingham…
The U.S. Dep’t. of Agriculture has just announced that a previously planned October 1st change which would have meant the end of federal mortgage funding for two areas in Shelby Co. has been put on hold until late March of 2013.
More than 90 communities nationwide—including Pleasant Grove in Jefferson Co. and areas in Walker and St. Clair counties—had been targeted to lose their eligibility, effective October 1st. Yesterday, however, Dallas Tonsager, USDA’s Under Secretary for Rural Development, issued a notice saying the changes would not take effect next week.
USDA loans are popular with many Buyers because they do not require down payments. They are available, however, only in areas USDA specifically designates.
As it stands now, the changes will take effect March 27, 2013 … unless USDA or Congress takes action in the meantime.
If you’re thinking of buying a home in Shelby County’s Calera or Chelsea area and are planning on financing your purchase with a no-down-payment USDA loan, you better get moving with your purchase, because time may be about to run out.
As of October first, the USDA is expected to update the areas that qualify for its loans. For Shelby Co., this means that Calera—which has long been a popular spot for home Buyers using USDA financing—will be dropped from the eligibility list. Chelsea is also set to be dropped.
In Walker Co., Jasper will be dropped from USDA loan eligibility, as will Moody and Pell City in St. Clair Co., and Pleasant Grove in Jefferson Co.
In all, more than 90 communities will be removed from the list of qualifying areas.
The change in qualifying areas is not a 100% sure thing. At least one U.S. Congressman—Republican Jeff Fortenberry of Nebraska—is pushing to get Congress to order a one year extension of USDA’s existing eligibility zones. Others pushing USDA to grant an extension include the National Association of Realtors, the National Association of Home Builders and the Mortgage Bankers Association.
Why does USDA plan to change the zones? The answer lies partly with the 2010 Census. An existing grandfathering clause allowed any community considered ‘rural’ in 1990 to continue to be eligible for USDA funding until the 2010 Census, as long as it has a population below 25,000 and met other critera. That clause, which was first enacted in 1990 and extended in 2000, is now set to expire.
So, unless Congress takes action, many communities that currently qualify for USDA financing will lose their eligibility—and for many of those areas, USDA loans are the only source of federal housing funding.
If you’ve been thinking of buying a home in the Birmingham/Shelby Co. area using the popular USDA loan program which allows you to buy with no down payment, you may be fast running out of luck.
USDA says the program is projected to run out of money by the end of April, and no new funding is currently anticipated.
In Shelby County, USDA loans have been responsible for many people buying homes in areas like Calera and Montevallo, as well as across many other parts of Alabama.
Because USDA loans are so attractive to many buyers—mortgage insurance isn’t required, either—they have often meant the difference between whether a Buyer is able to purchase property.
Carmell Cantrell is a Loan Officer with First Federal Mortgage in Birmingham, and has been following what may be the demise of the program she and other Lenders have worked with extensively over the years.
USDA loans could be revived if Congress acts, but whether that will happen remains unknown. If the program does, in fact, end, it will stand as a major point in real estate sales history, signaling the end of the so-called easy credit era.
Click the player below to listen to our interview with Carmell now…
…or click here if you’d like to download and listen on your personal listening device.
So … what to do if you’ve been thinking of buying a home using USDA loan program?
Experts have two words to suggest: Start saving.