Today someone asked me what the down side to an RD loan is and I decided it made an excellent topic of discussion. Basically the answer is that RD loans have geographical limitations therefore they are not available in every community. Second they have income limits; if your household income is over the set limit then you are not eligible for an RD loan. The mortgage insurance on an RD loan is split; you pay 1% upfront and then you pay a .35% annual fee; the mortgage insurance/monthly is very reasonable and possibly lower than a borrower may get on any other loan type with a zero down payment like the RD loan has. Nevertheless there is some argument that the RD loan does have both upfront and monthly fees and the monthly fee does not fall off ever. It is for the life of the loan. Also, the RD loan may have tougher underwriting standards than other loans. All RD loans run through GUS, RD’s guaranteed underwriting system.
The biggest reason that RD is less popular than conventional loans has to do with the appraisal. Appraisers must state on the appraisal that the property meets all FHA minimum property standards which, in effect, means you need an FHA appraisal when financing with an RD loan. There is an inherent hesitation between REALTORS and home sellers to accept offers for FHA or RD when there is a conventional offer on the table. Why invite trouble if you are the seller? For the buyer, the standard is set to support a buyer’s success in becoming a homeowner.
If you’re considering an RD loan then consider talking to me, Renee Duval. Phone or text me at 603-345-5644.
To read more about RD loans just click this link! https://www.nhmortgages.com/loan-programs-rural-development-rd/