***Update: USDA has announced the changes to the Rural Development ineligible area maps (As in almost everything below) have been delayed. They WILL NOT be changed on October 1st, 2014 as stated in the article below. This blog post will be updated as changes are implemented by USDA RHS.-Chris Touchet***
If you are buying a home and have been told the home is not “RD Eligible,” that may no longer be true! USDA has moved the lines, and made thousands of Baton Rouge Area Homes eligible for Rural Development (RD) Financing! On October 1st, 2014 changes to the USDA Rural Development ineligible areas will be implemented. I remember cringing as I read the email thinking that typically when something benefits the economy and the real estate industry in particular, the government seems to find a way to restrict or reduce its economic impact. Not this time! For anyone reading this post who isn’t a REALTOR or a mortgage loan officer, the USDA Rural Development (RD) loan is a true 100% loan for the purchase of a home in a “rural” area. It also carries the cheapest mortgage insurance premium of any “normal” mortgage loan. The definition of rural according to the government (in this case, the Guarantor of the mortgage) is dependent upon primarily location. Quite simply, the United States Department of Agriculture publishes a map which shows ineligible areas. If the home you want to buy is outside of the ineligible area it qualifies, only subject to a “Rural in Character” clause, which means only that a condominium unit, town home, or some patio home subdivisions MAY not qualify (subject to the USDA underwriter.) While it is difficult to demonstrate the impact of this decision in a blog post, I have two maps that will demonstrate the size difference in the ineligible areas. * SEE EXAMPLE BELOW. Many homes that today DO NOT qualify for an RD Loan, will qualify on October 1st. The RD Loan is a very important part of a REALTOR’s arsenal because it is 90% of the time the BEST DEAL for the client, a great many buyers will benefit from this change!! A perfect example is REALTOR and Smart Agent Derek Overstreet’s ACTIVE listing at 8334 Prescott Road, Baton Rouge, LA 70812:
Today, the property is INELIGIBLE for an RD Loan. It will be ELIGIBLE after October 1st, 2014. The first picture is the initial eligibility determination from USDA under the current guidelines. The second (bottom) picture shows the same property will be eligible after October first. More importantly, note how much smaller the ineligible area is than the previous (current) determination above!
Chris Touchet, REALTOR, Broker
Smart Move Real Estate
** Note: The pictures below seem to be blurry on this post, if you click on them individually, a larger and clearer copy comes up.