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FAQ
Frequently Asked Questions
Single-Family Housing
Guaranteed Loan Program
Origination
Revised August 5, 2024 Page 2
Frequently Asked Questions (FAQ)
This document consists of answers to commonly asked questions on the Rural
Development Single Family Housing Guaranteed Loan Program Technical Handbook
(HB-1-3555). The policy information contained in this guide is based on the
applicable Regulations and Technical Handbook, and all lending decisions should
adhere to the guidance contained within. You can find a complete copy of the
Regulation, 7 CFR Part 3555, and the Technical Handbook on the Rural Development
Directives Website, located at
https://www.rd.usda.gov/sites/default/files/hb-1-
3555_0.pdf.
General loan scenario or policy questions may be sent to the Guaranteed Policy, Analysis
and Communications Branch at sfhgld.program@usda.gov
.
Additional lender resources, including up to date information on file turn times and a full
listing of contacts based on topic, can be found on the Guaranteed Lender Website
located at https://www.rd.usda.gov/page/sfh-guaranteed-lender
.
Lenders can also utilize USDA’s Customer Access Lender Line (CALL), which is available to
provide turn time updates, as well as access to specialists and analysts who are available
to answer your questions on specific files, lender recertifications and approvals, policies
and scenarios, and GUS technical questions. The toll-free number for CALL USDA is (833)
314-0168, which is available from 9:00 am to 3:30 pm ET.
Critical program information such as policy updates, funding status, and automation
changes are sent by email through GovDelivery. Lenders are encouraged to sign up for
GovDelivery notices at:
https://public.govdelivery.com/accounts/USDARD/subscriber/new
.
Thank you for supporting the Single-Family Housing Guaranteed Loan Program!
Revised August 5, 2024 Page 3
Table of Contents
Appraisal and Property Requirements 4
Appraisal (HB-1-3555, Chapter 12) 4
Condominiums (HB-1-3555, Chapter 12) 5
Manufactured Homes (HB-1-3555, Chapter 13) 5
New Construction and Rehabilitation (HB-1-3555, Chapter 12) 6
New Construction – Single Close Loan (HB-1-3555, Chapter 12) 7
Property Eligibility (HB-1-3555, Chapter 12) 8
Property Inspections (HB-1-3555, Chapter 12) 10
Repairs (HB-1-3555, Chapter 12) 11
Approval and Closing 12
Closing (HB-1-3555, Chapters 6 and 16) 12
Eligible Loan Purposes (HB-1-3555, Chapter 6) 14
Refinance Transactions (HB-1-3555, Chapter 6) 16
Secondary Financing (HB-1-3555, Chapter 16) 18
Seller/Interested Party Contributions (HB-1-3555, Chapter 6) 19
Credit Underwriting 20
Applicant Eligibility (HB-1-3555, Chapter 8) 20
Assets (HB-1-3555, Chapter 9) 22
Credit History (HB-1-3555, Chapter 10) 24
Employment/Income (HB-1-3555, Chapter 9) 29
Gifts (HB-1-3555, Chapter 9) 32
Liabilities (HB-1-3555, Chapter 11) 33
Lender Approval and Resources 35
Lender Approval (HB-1-3555, Chapter 3) 35
Resources 36
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Appraisal and Property Requirements
Appraisal (HB-1-3555, Chapter 12)
Do appraisers need to be on an approved list to complete appraisal reports for
Rural Development loans?
No, Rural Development does not maintain a list of approved appraisers. It is the
responsibility of the lender to select qualified appraisers that are properly
licensed or certified, as appropriate, in the state in which the property is located.
The lender has determined there are significant concerns with an appraisal. Can
a second appraisal be ordered?
Rural Development does not require that the first appraisal ordered must be
utilized for underwriting. The approved lender may order an alternate appraisal if
the initial appraisal report is unacceptable.
If a lender obtains a second appraisal, can the cost be financed as part of the
loan?
Closing costs that are reasonable and customary can be paid with loan funds.
Is Form 1004MC required?
No, Form 1004MC is not required.
The appraised value is lower than the purchase price. An addendum to the
Purchase Agreement was executed to reduce the purchase price. Does the
addendum need to be sent to the appraiser to update the report?
Rural Development does not require the appraisal report to be updated, however,
the amendment to the contract must be retained in the lender’s permanent loan
file.
Are “as improved” appraisals acceptable?
Yes, “as is” or “as improved” appraisals are acceptable. When an “as improved”
appraisal is obtained, Fannie Mae Form 1004D/Freddie Mac Form 442, Appraisal
Update and/or Completion Report, may be utilized by the lender to report the
completion of a repair and/or satisfaction of requirements and conditions noted
in the original appraisal report.
Can an appraisal be transferred between applicants?
No, appraisal transfers can only be between lenders for the same applicant and
purchase transaction.
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An appraisal is being transferred from another Lender. The appraisal was
completed as-is, however, the appraiser noted repairs are needed. Does
requiring an Appraisal Update (1004D) to account for the repairs invalidate the
appraisal report transfer?
An appraisal transfer must meet the guidance in HB-1-3555, Chapter 12. If the
appraisal calls for repairs or additional inspections, those issues must be
addressed. If the lender requires an Appraisal Update (1004D), then the lender is
responsible for engaging the original appraiser to provide the 1004D. This does
not invalidate the appraisal report transfer.
Condominiums (HB-1-3555, Chapter 12)
What documentation is required to support a condominium's eligibility?
HB-1-3555, Chapter 12 states that lenders must retain evidence that they have
reviewed condominium documentation that supports the project’s approval or
acceptance by HUD/FHA, VA, Fannie Mae, or Freddie Mac. The lender must
determine the documentation needed to make that determination.
Is a condominium that is not on the FHA approved condominium list, but meets
Fannie Mae guidelines, eligible for the Guaranteed Loan Program?
Yes, units in a condominium project may be eligible if the condominium has been
approved or accepted by HUD/FHA, VA, Fannie Mae, or Freddie Mac. The lender
must document their decision and retain all supporting information in their
permanent loan file.
Manufactured Homes (HB-1-3555, Chapter 13)
Does USDA allow the financing of existing Manufactured homes?
Existing manufactured homes are ineligible unless it is a purchase of an existing
Rural Development Section 502 Direct or Guaranteed financed home. However,
select states have been included in an Existing Manufactured Housing Pilot
program where existing manufactured homes built after January 1, 2006, may be
eligible for financing. Please see the Federal Register Notice
on t
his topic for
additional information.
Is there a list of approved manufactured dealers?
No, the Single Family Housing Guaranteed Loan Program does not approve
manufactured home dealers.
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An applicant is purchasing a manufactured home that was constructed 3 years
ago but was never sold by the manufacturer. It is being purchased directly from
the manufacturer and will be moved from the manufacturer to the site. Does
this constitute a "new" manufactured home?
New manufactured homes are defined as a new unit in stock that is less than 12
months from manufactured date, which has never been installed or occupied at
any other site or location. Since the manufactured date is over 12 months, it does
not meet the definition of a "new" manufactured home.
How do we complete GUS when using the Existing Manufactured Housing Pilot
program?
GUS does not support loan applications submitted under the pilot program.
Lenders should submit applications following the guidance provided in the
Manual File Submission Job Aid, available in the
Linc Training and Resource
Library.
New Construction and Rehabilitation (HB-1-3555, Chapter 12)
Is a purchase transaction where the home was built within the past 12 months
considered a new construction transaction, thus subject to the applicable new
construction documents?
Yes, dwellings less than 1-yea
r-old and never occupied are considered new
construction and the documentation requirements for new construction are
applicable.
An applicant already ow
ns land and wants to build a home on the property. Is
this considered a purchase or a refinance?
Even though the land is already owned by the applicant, lenders should select
“Purchase” in GUS for this type of transaction.
Based on the location of the property, we are unable to obtain a Certificate of
Occupancy. Is there other documentation that can be obtained to satisfy the
new construction requirements?
When a Certificate of Occupancy cannot be obtained, the lender may obtain
copies of the three construction phase inspections, as identified in Chapter 12 of
HB 1-3555, and a one-year builder warranty; or alternatively, a copy of the final
inspection and a 10-year insured builder warranty.
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If there is no building inspector for the local jurisdiction, who can complete the
final inspection?
It is the lender’s responsibility to find an alternative, qualified inspector when the
local jurisdiction does not perform construction inspections.
Are there any options available when the construction documents identified in
Chapter 12 are not able to be obtained on a new construction home?
New home purchase transactions that cannot meet the minimum required plan
certification, inspections, and warranty documentation requirements outlined in
Chapter 12 of HB-1-3555 are limited to a 90 percent loan to value (LTV).
A property that was previously used as an income producing operation, has
since been converted into a single-family residence. Could this property be
considered for approval?
In order for a property to be considered eligible, the property must be
predominately residential in use, character, and design. If the property is
considered income producing, regardless of the applicant’s future intent, it would
not be eligible.
New Construction – Single Close Loan (HB-1-3555, Chapter 12)
What are the benefits of using the single-close feature?
Both options in the single-close feature reduce the cost for the applicant, as there
is only one closing. An optional interest reserve, contingency reserve, and PITI
reserve can be financed as part of the loan, depending on the type of single-close
transaction utilized. In addition, lenders are provided the protection of the Loan
Note Guarantee throughout the construction period.
Is there only one single-close loan feature available?
No, there are two options under the single-close loan feature.
The first option allows financing of an interest reserve and a contingency reserve,
with interest only payments during the construction period. The loan is
reamortized at the completion of construction.
The second option allows the financing of a (PITI) payment reserve in addition to
a contingency reserve. The loan begins amortizing and is eligible to be
securitized immediately on a 30-year schedule, eliminating the need for a
reamortization, and allowing the lender to sell the loan prior to the completion of
construction.
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What happens to excess reserve funds financed within the single-close feature
once construction is complete?
Excess reserve funds are applied to the principal balance of the loan.
What is the maximum loan to value for single-close transactions when reserves
are financed?
The total loan amount, including any reserves financed, cannot exceed 100% loan
to value. The loan may exceed the appraised value only by the amount of the
upfront guarantee fee being financed.
Does a single-close transaction need to be reamortized at the end of the
construction period?
If option one is utilized, only interest payments are made through the
construction period. A reamortization would be processed following the
completion of construction.
With option two, principal and interest payments are made throughout the
construction period, whether through the borrower’s personal funds or a PITI
reserve. Since the loan begins amortizing and is eligible to be securitized
immediately, a reamortization is not necessary.
Is there a minimum repair amount to qualify for the purchase with
rehabilitation and repair program?
No, there is not a minimum repair amount.
Property Eligibility (HB-1-3555, Chapter 12)
When a title commitment reflects an exception for an oil and gas lease, what
procedures are to be followed? There is no evidence of any type of production
on subject property.
For purchase transactions, Rural Development does not prohibit mineral, oil, or
gas leases. The lender must determine the primary reason for the purchase is a
residential residence. Any income earned from these leases must be included in
annual income, the lender must confirm the dwelling and site will not be
adversely affected, and the property must have adequate homeowners' insurance
coverage.
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Are applicants able to purchase a duplex?
One unit of the duplex may be eligible; however, they cannot purchase both units
as it would be considered an income producing property.
Can loan funds be used to purchase a property to flip?
No, guaranteed loan funds must be used to acquire a new or existing dwelling as
the borrower’s permanent residence. Purchasing a property with the intention to
flip is not authorized.
Does Rural Development have restrictions on purchasing a home that may have
been flipped by the seller?
It is the lender’s responsibility to ensure any recently sold property’s value is
strongly supported when a significant increase in value between sales occur. The
lender must perform a thorough review of the appraisal report to validate and
support the property’s value and protect the applicants from possible predatory
real estate lending practices.
Is there an acreage limitation?
There is no specific limitation to the size/acreage of the site. The appraiser must
provide an explanation in the addendum of the appraisal to explain adjustments
to comparable properties and how the subject compares to other properties in
the area. In addition, the site cannot have income-producing land that will be
used principally for income producing purposes. Vacant land or properties used
primarily for agricultural, farming, or commercial enterprise are ineligible.
Are there minimum or maximum square footage requirements?
There are no square footage requirements or limitations for stick-built housing.
Manufactured homes must have a floor area of at least 400 square feet.
Are there specific criteria the subject property must meet to be acceptable?
Certification needs to be obtained from an appraiser or inspector determined
qualified by the lender that the property meets the minimum property standards
of HUD Handbook 4000.1.
Are properties containing a swimming pool (in-ground or above ground)
eligible?
There are no restrictions on in ground or above ground swimming pools.
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Are cisterns acceptable?
Private well and wastewater systems must meet the minimum property standards
of HUD HB 4000.1 or the requirements of the local and/or state health authority
to be eligible.
The applicant currently lives in the subject property and entered into a contract
for deed agreement with the seller. Can the SFHGLP be used to refinance the
existing contract for deed?
Yes, paying off a contract for deed is an eligible loan purpose as long as the
borrower is not on title. Rural Development treats this as a purchase transaction,
not a refinance.
We have a property address that returns “unable to determine” for property
eligibility. What do we do?
There are times the mapping system cannot locate a specific property. When that
occurs, the lender should accurately identify the exact location of the property
and provide copies of the maps showing the correct property location with the
application package. Lenders can obtain assistance with determining a property’s
eligibility by contacting the Guaranteed Policy, Analysis and Communications
Branch at sfhgld.program@usda.gov
.
Property Inspections (HB-1-3555, Chapter 12)
Can a non-FHA roster appraiser certify the property meets the requirements of
HUD HB 4000.1?
Licensed or certified appraisers who are not FHA roster appraisers may certify the
property meets the requirements of HUD Handbook 4000.1 if the lender
determines the appraiser is thoroughly familiar with HUD Handbook 4000.1.
An appraisal was completed as is, with certification the property meets the
requirements of HUD HB 4000.1. However, the attic was sealed, therefore, it
was not inspected. Does the attic need to be unsealed for the appraiser inspect?
In accordance with the HUD Handbook 4000.1, if there is no access to the attic,
the appraiser must report the lack of accessibility to the area in the appraisal
report. There is no requirement to cut open walls, ceilings, or floors.
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The appraisal completed indicated repairs were necessary. The repairs have
been completed; however, the original appraiser is unavailable. Is it acceptable
for a different appraiser to complete the final inspection?
A new appraiser may perform the final inspection if they are able to certify the
improvements were completed in accordance with the requirements and
conditions in the original appraisal report, provide photographs of the completed
improvements, and sign the final inspection report.
For properties with privately owned wells, is there a need for water testing? If
so, what elements must be addressed?
Yes, water quality tests are required on individual water systems. Rural
Development does not identify specific elements that must be tested for. The
water quality of the well must meet the requirements of the state or local
authority. If the state or local authority does not have specific requirements, the
maximum contaminant levels established by the Environmental Protection
Agency (EPA) will apply.
I have a property with a public water source for the home, but also has a well
on the property that is only used for watering the lawn. Does that well need to
be inspected?
If the site has public water, it is assumed to meet state and local requirements
with no additional documentation or inspections. The additional well, when it is
not the primary source of water, does not require an inspection.
Is a water quality test required on a refinance transaction?
Water quality tests are not required by Rural Development for refinance
transactions; however, the lender may require additional inspections at their
discretion.
Repairs (HB-1-3555, Chapter 12)
At what amount should we establish an escrow account for repairs?
The funds escrowed must not be less than the repair cost contract. The loan
underwriter may set amounts greater than the actual repair costs. Any financed
escrow funds remaining after repairs are complete must be utilized for an eligible
loan purpose or applied to the loan as a principal payment.
How many bids are required for escrow repairs?
Rural Development does not have a requirement for the number of bids to be
obtained.
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Will Rural Development issue a Conditional Commitment subject to a final
inspection showing required repairs are complete?
Yes, a Conditional Commitment may be issued subject to the completion of all
required repairs. The lender must document the repairs are completed prior to
loan closing for the loan to be eligible for the Loan Note Guarantee, or the lender
can make the determination to allow for a repair escrow hold back.
Approval and Closing
Closing (HB-1-3555, Chapters 6 and 16)
Can an individual who is not a borrower be on title?
Any individual whose signature is required by state law must sign the security
instruments to create a valid first lien. Rural Development does not prohibit
additional parties from being on title.
Are deed restrictions allowed?
Rural Development does not dictate if or when deed restrictions are acceptable. It
is the lender's responsibility to ensure they obtain marketable title with a first lien
position and have the ability to foreclose and/or conduct loss claim servicing.
Does Rural Development require Agency specific loan documents? Is an
occupancy rider required to be signed at closing?
Industry standard legal documents may be used. An occupancy rider is not
required.
Does USDA allow for the applicant to sign documents electronically?
Yes, e-signatures are accepted. The lender is responsible to ensure the e-
signature is eligible and meets all legal requirements.
Can loan fees that are paid with a credit card be reimbursed at closing?
No, loan fees paid by the applicant with credit cards or other short-term loans are
not reimbursable at closing.
Can the applicant get their earnest money, cost of an inspection or appraisal,
and/or Homeowners Insurance premiums paid back at closing?
If the source of the funds can be properly documented to show they were initially
paid by the applicant, the applicant can be reimbursed for these costs from loan
funds at closing.
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A loan closed at a higher loan amount than what was authorized on the
Conditional Commitment. Can a principal reduction for the overage amount be
completed?
No, since the loan has closed, a principal reduction is not acceptable. The lender
may perform a loan modification to correct the loan amount to match the issued
Conditional Commitment or request Rural Development to release the GUS loan
back for correction.
A loan closed at a higher interest rate than what was authorized on the
Conditional Commitment. How can we proceed?
The lender may perform a loan modification to correct the interest rate to match
the issued Conditional Commitment. If that is not an option, the lender must
request a release of the GUS loan back for correction. Once the interest rate has
been corrected, a new underwriting submission may be performed. Rural
Development will review the updated submission and, if approved, issue a new
Conditional Commitment.
The loan amount was established to include closing costs and repairs; however,
the final invoice came in lower than expected. Can we lower the loan amount
without having to resubmit the application?
Yes, if the Conditional Commitment has been issued, the lender may close the
loan for a lower amount without having to resubmit the loan for review.
Property taxes in many states are paid in arrears, which results in a large tax
credit at closing. Can an applicant receive cash back as a result of this credit?
The credit may be used to pay for closing costs but cannot result in cash back to
the applicant. Only costs initially paid by the applicant out of pocket can be
returned to the applicant at closing.
When preparing for loan closing, it was identified that there are excess seller
paid costs that are not being used. Is it acceptable to use the extra seller paid
costs as a principal reduction?
Yes, excess seller contributions can be applied as a principal reduction at closing
or refunded to the seller. They cannot be disbursed as cash at closing to the
applicant.
An application has been submitted to Rural Development for review, however,
a Conditional Commitment has not yet been issued. Can the loan close since the
file has been submitted to Rural Development?
No, the loan cannot close prior to issuance of the Conditional Commitment.
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What options are available when the Conditional Commitment will expire prior
to loan closing?
The lender has 90 days from the issuance of the Conditional Commitment to
close the loan with an opportunity for one 90-day extension. The extension must
be requested prior to the expiration of the Conditional Commitment. The lender
is responsible for ensuring documentation of credit, income, assets, etc. are
updated, as needed.
The applicant’s credit report will be expiring prior to loan closing. Does the file
need to be resubmitted in GUS?
Per the resubmission policy in HB-1-3555, Chapter 5, the bureau update of a
credit report due to the expiration of the credit report does not require
resubmission of the application if there is no adverse impact on the outcome of
the underwriting recommendation. The lender must retain the updated credit
report in their permanent loan file.
Is a principal reduction at closing acceptable to prevent the applicant from
receiving excess cash back? If so, is there a maximum principal reduction
allowed?
Yes, a principal reduction at the time of settlement is acceptable. There is no
limit on the amount of the principal reduction, however, the lender should
determine if a loan modification would be a better option.
Does USDA allow an applicant to close in a trust?
No, the two forms of ownership acceptable are fee-simple and secured leasehold.
Is there a specific system that lenders need to access to obtain the Loan Note
Guarantee?
Lenders may obtain the Loan Note Guarantee through the Lender Loan Closing
System. Refer to the Lender Loan Closing Guide in the
Linc Training and Resource
Library.
Eligible Loan Purposes (HB-1-3555, Chapter 6)
Are there restrictions on the amount of closing costs that can be financed?
Closing costs that are reasonable and customary can be paid with loan funds.
Closing costs cannot exceed those charged to other applicants by the lender for
similar transactions such as FHA-insured or VA guaranteed first mortgage loans.
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Is there a maximum interest rate that can be charged?
No, the lender and the applicant are free to negotiate any mutually acceptable
fixed interest rate, in compliance with CFPB standards.
The market value, based on the appraisal, is slightly less than the purchase price
and the seller will not lower the sales price. Can the applicant contribute the
difference?
Yes, GUS and the application will need to reflect the additional funds needed for
closing and the lender must verify the applicant has the funds available to close.
Can an applicant use a small portion of the guaranteed loan to pay off personal
debt?
No, paying off an existing debt is not an eligible loan purpose.
Does USDA allow non-arm’s length transactions?
Rural Development does not restrict non-arm’s length transactions. This should
be disclosed to the appraiser and any gifts of equity would need to comply with
the requirements of HB-1-3555, Chapter 9.
Does USDA allow a 2-1 buydown rate?
Temporary buydowns are allowed if the requirements in HB-1-3555, Chapter 11
are met.
An applicant currently owns land with a mortgage on it and wants to build a
home on the land. Can loan funds be used to pay off the existing mortgage on
the land owned?
Yes, the remaining balance of the mortgage for the land is eligible to be included
in the guaranteed loan. This would be treated as a "purchase" transaction in GUS.
Are there purchase price limits?
No, there are no defined purchase price limits.
Can the upfront guarantee fee be financed into the loan?
Yes, the upfront guarantee fee may be financed in the loan. When financed, the
loan amount may exceed the appraised market value of the property by the
amount of the fee being financed. When financing a new dwelling where the
required construction documentation cannot be obtained, the loan is limited to
90% of the appraised market value, plus the financed portion of the upfront
guarantee fee.
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Can the cost of repairs be included in the loan?
Yes, repairs associated with the purchase of the dwelling are an eligible loan
purpose.
Are private transfer fees an eligible loan cost?
Loan funds may only be used to pay for reasonable and customary expenses
related to obtaining the loan. The Lender is responsible for verifying that any
existing or proposed encumbrance on title comply with Federal, State, and Local
laws and does not interfere with the guaranteed loan’s first lien position.
Is a ratio waiver required on a purchase transaction when the total debt ratio
exceeds 41% on an “Accept with Full Documentation” GUS recommendation?
No, on a GUS “Accept or an Accept with Full Documentation” underwriting
recommendation, the ratio waiver is automatically approved, even if the file was
selected for a full documentation review.
Is a ratio waiver available on a purchase transaction when the total debt ratio
exceeds 41% on a “Manually Submitted File, Refer, or Refer with Caution” GUS
recommendation?
Yes, a ratio waiver is available on a “Manually Submitted File, Refer, or Refer with
Caution” submission if the total debt ratio exceeds 41% and the applicant meets
certain Agency requirements. Refer to Chapter 11. PITI ratio waivers are no
longer permitted.
Refinance Transactions (HB-1-3555, Chapter 6)
On a refinance transaction, does the loan have to be open for 12 months or
does the borrower need to have made 12 actual payments to qualify?
The existing loan must have closed 12 months prior to the date the application is
submitted to the Agency. The 12 months is based on the date the loan closed,
not the number of payments made.
How do we submit a Streamlined-Assist refinance application since it is not
submitted through GUS?
The Streamlined-Assist application package should be submitted following the
guidance provided in the Manual File Submission Job Aid, available in the
Linc
Training and Resource Library.
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Can existing subordinate “silent” seconds can be included in the loan amount
for a refinance transaction?
No, existing subordinate “silent” seconds (excluding Direct Loan recapture
receivable accounts) cannot be included in the newly refinanced loan. They must
be paid with other funds or remain subordinate to the new guaranteed loan.
On a Streamlined-Assist refinance, are income and asset documents required?
Yes, income limits still apply, therefore, income and asset documentation must
still be obtained.
Are ratio waivers required on refinance transactions?
Non-Streamlined and Streamlined refinance transactions may require a debt ratio
waiver. Refer to Chapter 11 for details. Streamlined-Assist refinance transactions
are not subject to ratio requirements; thus, a ratio waiver is not required.
Can a borrower receive cash back at closing on a refinance transaction?
Borrowers cannot get cash back with the exception of eligible expenses already
paid out of pocket, as outlined in Chapter 6. Rural Development does not
consider this a limited cash out refinance.
Are there any exceptions that allow you to be able to refinance a USDA loan
that the borrower has owned for less than 12 months?
No, there are no exceptions to the 12-month requirement.
Is a Streamlined or Streamlined-Assist refinance limited to the initial loan
amount?
No, the refinance transaction is not restricted to the initial loan amount. The
maximum loan amount may include the principal and interest balance, eligible
closing costs, and the upfront guarantee fee.
Do borrowers applying for a refinance have to meet the household income
limits?
Yes, the adjusted annual maximum income limits apply to all guaranteed loans.
Are conventional loans eligible to be refinanced?
No, only current Rural Development Direct and Guaranteed Loans are eligible to
be refinanced.
Can borrowers choose to do a 25-year (or shorter) term on a refinance?
No, a 30-year term is the only option, however, there is no penalty for extra
principal payments made.
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Can a borrower refinance a property that was originally located in an eligible
rural area, but no longer is?
Yes, any existing USDA Direct or Guaranteed loan is eligible to be refinanced,
even if it is now located in a non-eligible rural area. Can discount points be
financed on a refinance?
Discount points to reduce the interest rate are eligible on all loan options.
Discount points charged for reasons other than to reduce the interest rate are
ineligible.
Two borrowers who currently have a USDA Mortgage are going through a
divorce. As part of the divorce, one borrower needs to give the ex-spouse
$20,000 as their share of equity in the house. Is this allowed through a
refinance with USDA?
No, cash out from collateral equity is not an eligible loan purpose.
Are private well and septic inspections and/or water quality tests required for a
refinance?
No, inspections, including water quality tests, are not required for refinance
transactions, however, the lender may require additional inspections at their
discretion.
Secondary Financing (HB-1-3555, Chapter 16)
Can down payment assistance programs be utilized?
Yes, down payment assistance programs may be utilized as long as the
guaranteed loan remains in first lien position.
How should down payment assistance program funds be entered in GUS?
To include down payment assistance, complete the “Other New Mortgage Loans
on the Property You are Buying or Refinancing” section of the Loan and Property
Information page. In addition, the monthly payment associated with the second
mortgage would need to be entered as “Subordinate Lien P&I” in the Mortgage
Loan Information section of the Lender Loan Information page. Additional
information on utilizing GUS can be located in the GUS Lender User Guide
,
located in the USDA Linc Training and Resource Library.
Does Rural Development have a maximum CLTV?
Rural Development guidelines do not specify a maximum CLTV as long as the lien
position criteria outlined in HB-1-3555, Chapter 16 is met.
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Are funds received through down payment assistance programs considered in
the conventional credit test?
No, these are not the applicant’s own funds, therefore, they are not included in
the conventional credit test.
Are disaster relief grants allowed?
Yes, as long as the lien position criteria outlined in HB-1-3555, Chapter 16 is met.
Seller/Interested Party Contributions (HB-1-3555, Chapter 6)
Is there a limit on seller concessions?
Seller contributions (or other interested parties) are limited to 6% of the sales
price and must represent an eligible loan purpose. Funds provided by the seller
to pay the buyer’s real estate commission fees are not included in the interested
party contribution limitation.
The seller will be paying $1,200 to the applicant for a carpet allowance. How do
we structure this?
The carpet either needs to be replaced prior to closing or the funds need to be
set up as a repair escrow. The applicants cannot directly receive the funds for the
carpet at closing.
Can seller concessions or Real Estate Agent commissions be used to pay off
debt for the applicant?
No, the seller and Real Estate Agent are interested parties in the transaction. Any
funds contributed to the transaction from interested parties must be for an
eligible loan purpose, such as closing costs or prepaids. Paying the applicant’s
debt to qualify for the loan is not an eligible loan purpose.
Is it acceptable for the seller to pay the upfront guarantee fee?
Yes, seller contributions may be used to pay all or part of the upfront fee.
In states where real estate taxes are paid in arrears and the seller is giving a
credit for a portion of the taxes, how do we enter this in GUS?
The seller’s prorated taxes are entered in the seller credit section. A tax pro-
ration documents the seller's portion of an upcoming tax bill. This is considered
a seller credit, but not a seller concession, as the seller paying something they
owe is not above and beyond what they normally pay. Additional information on
utilizing GUS can be located in the GUS Lender User Guide, located in the
USDA
Linc Training and Resource Library.
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Credit Underwriting
Applicant Eligibility (HB-1-3555, Chapter 8)
If an applicant is not a U.S. citizen, do they qualify for the SFHGLP?
To be eligible, the applicant must be a U.S. citizen, a U.S. non-citizen national, or
a qualified alien, as defined in HB-1-3555, Chapter 8. USDA issued a temporary
waiver allowing individuals with a valid social security number and work
authorization, as evidenced by documentation such as an Employment
Authorization Document (EAD), Form I-766, issued by the U.S. Department of
Homeland Security, to participate in the SFHGLP. Unless extended, this waiver
will expire on May 2, 2025.
Is homebuyer education counseling required?
Homebuyer education counseling is recommended but is not required.
An applicant has enough liquid assets to put 20% down and pay all closing
costs. However, the total debt ratio will exceed 36%. Is the applicant eligible?
Yes, the applicant qualifies since the cumulative criteria from HB-1-3555, Chapter
8, cannot be met.
Do liquid funds in a self-employed applicant's business account count towards
the conventional credit test?
No, business assets that are held in specifically designated business accounts do
not count against the conventional credit test.
An applicant recently sold their home and has funds available to qualify for
20% down payment. The applicant wanted to use those funds to furnish the
new home they are purchasing. Would it be acceptable for the applicant to
provide a letter stating the proceeds will be used to furnish the new home,
thereby not counting towards the 20% down payment requirement?
As part of the final submission to the Agency, the lender and applicant will certify
on Form RD 3555-21 that the applicant is unable to secure conventional credit, as
defined in Chapter 8. If you have documentation that indicates the applicant will
meet the criteria to obtain conventional credit at the time of loan closing, that
will need to be considered when certifying on Form RD 3555-21.
Are co-signers or non-occupant co-borrowers allowed?
No, co-signers and non-occupant co-borrowers are not permitted.
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I have a client who currently owns a home, which was not financed by Rural
Development. The individual is relocating for a new job. Is there a minimum
number of miles required between homes to be eligible?
No, the Handbook does not stipulate a required distance when an applicant is
relocating. The approved lender must document the permanent loan file with
documentation supporting the requirements of Chapter 8 have been met.
Are dwellings owned by the applicant’s business considered retained dwellings,
as defined in Chapter 8?
If the dwellings are owned by a business, and not the applicant as an individual,
they would not be considered retained dwellings of the applicant and the
requirements for retained dwellings in Chapter 8, Section 8.2 would not apply.
However, transferring a home into a business name to meet this requirement is
prohibited.
If the applicant owns an investment property, but has not owned a primary
residence in the last 3 years, are they eligible for a Rural Development loan?
It is not the intent of the program to assist individuals in building an investment
portfolio. Whether the applicant resides in the retained home or not, the
requirements in Chapter 8 apply.
An applicant’s parents have a life estate that indicates the property will transfer
to the applicant upon the parents’ death. Does Rural Development consider this
a property the applicant owns?
Since the property will not transfer to the applicant until the parents’ death, the
property is not considered to be the applicant's dwelling at this time. Thus, it is
not considered a retained dwelling.
Do the requirements in Chapter 8 for retaining a dwelling apply solely to the
applicants, or all household members?
The requirements regarding retaining ownership in a dwelling is applicable to all
applicants.
An applicant co-signed on a non-Rural Development mortgage but hasn’t lived
in the property. Will being a co-signor on another property that will not be sold
make them ineligible?
If the applicant is only a co-signer, he/she does not own the dwelling and is,
therefore, not rendered ineligible.
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An applicant owns an empty lot. Does this render the applicant ineligible?
No, land without a dwelling does not need to meet the criteria for a retained
dwelling.
The applicant has a current Rural Development mortgage; however, the home
was awarded to the ex-spouse in a divorce. Is the applicant eligible for another
Rural Development loan if the ex-spouse has been making the payments?
No, unless the remaining borrower refinances the Rural Development loan, both
remain liable for the loan. Borrowers cannot have more than one Rural
Development loan outstanding.
Assets (HB-1-3555, Chapter 9)
Can 401K or IRA funds be considered for reserves?
The lender can consider up to 60% of the vested amount of the retirement
account as reserves. Any funds borrowed from these accounts, such as a 401k
loan, are not considered cash reserves. Retirement accounts that restrict
withdrawals to circumstances involving the applicant’s employment separation,
retirement, or death should not be considered as a cash reserve.
The applicant holds an active real estate license and is representing themselves
on the sales contract. Can the commission earned at closing be counted as
reserves?
The applicant can act as their own agent, however, the sales commission to be
earned at closing is not eligible as reserves.
Can the proceeds from the sale of a home be considered for reserves?
Verified sales proceeds can be considered reserves. Documentation to verify sales
proceeds includes the closing disclosure, or acceptable alternative, and
verification of where the proceeds are held and their availability to the applicant.
Lenders should include the amount as an “Other Asset” labeled as “Proceeds
from Real Estate Property to be sold on or before closing” to ensure GUS to
recognizes the inclusion in cash reserves. Additional information on utilizing GUS
can be located in the GUS Lender User Guide, located in the
USDA Linc Training
and Resource Library.
Is there a limit on the amount of liquid assets an applicant can have in reserves?
No, there is not a specified limit on the amount of assets. However, the test for
conventional credit, based on the requirements outlined in Chapter 8, still applies.
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What figure is used to determine the balance on a checking or savings account
for reserves?
Lenders must use the balance as reflected on the most current bank statement,
or on the verification of deposit if the date on the verification of deposit is dated
after the bank statement. Online transaction print outs, registers, or lists are not
permitted in lieu of bank statements.
If an applicant does not need funds to close, are we required to verify assets?
Yes, assets must be verified whether they are required for funds to close or not.
Assets may affect income eligibility (Chapter 9) and applicant eligibility (Chapter
8).
What is the minimum reserve requirement?
There is not a minimum reserves requirement. Reserves are used in the risk
assessment in GUS as a positive compensating factor for housing payments after
closing, but they are not required.
Can a College Savings Plan (529 Plan) be included as reserves?
Funds in a 529 plan may be withdrawn at any time, although incurring penalty
fees to do so. Thus, 60% of the amount available to the applicant may be used as
reserves.
Can unsecured borrowed funds be used as reserves or funds to close?
No, unsecured loans, including borrowing funds from a personal loan, credit card
advance, etc., are not eligible for reserves or funds to close.
Do joint asset accounts, where the other party is not on the loan, need to be
verified and included?
Yes, all assets of the applicant, even if they are jointly held with another party,
must be disclosed, and included in the net family assets.
Can a lender utilize a 3rd party vender to obtain the applicant’s bank
statements?
Yes, it is acceptable to use 3rd party vendors when it is standard industry practice.
Can borrowed funds be used to pay off debts?
Yes, as long as the payment is included in the total debt ratio.
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I have a file that is a refer. If they do not have any assets or earnest money
being credited, do I need to submit asset documentation in the application
package?
Yes, if there are asset accounts disclosed on the application, the accounts need to
be documented and included in the complete application package.
The guideline for obtaining bank statements for checking, savings, and money
market accounts indicates we are to obtain two months of the most recent
statements. Is that considered most recent upon submission to Rural
Development or the application date?
The most recent statements at the time of loan application. Please note that the
statements cannot be greater than 120 days old at the time of loan closing.
Can a borrower print out a transaction statement, register, or list of their
account activity and have it stamped by the banking institution in place of the
official bank statements in regard to assets and reserves?
No, the printouts need to be the most recent official monthly bank statements, or
a verification of deposit provided by the banking institution. The applicants
cannot print out a partial transaction statement, 30 or 60 days, that shows the
URL and have the financial institution stamp and date it. Only the official
monthly bank statement is allowable. Official monthly bank statements obtained
through the institution’s website are permitted. For guidance on gifts, refer to
Chapter 9.
My borrower has multiple payment app (Venmo, PayPal, etc.) deposits on their
bank statements. Do I need to investigate all of them?
Multiple payment app deposits received in a month are not automatically
considered “recurring” deposits. Payment app deposits that exceed $1,000 are
required to be investigated to confirm the deposit is not from an undisclosed
income source.
Credit History (HB-1-3555, Chapter 10)
An applicant has a clear CAIVRS result but has had a wage garnishment for over
3 years on a US Education loan. Is the applicant eligible since the CAIVRS was
clear?
No, even when the applicant’s CAIVRS is clear, if the credit indicates there is a
delinquent federal debt, the applicant is ineligible unless the debt is paid in full,
or a release of liability is documented.
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The GUS underwriting report indicates that CAIVRS has identified the applicant
has a delinquent Federal debt, however, we have documentation that this is no
longer in the applicant's name. How do we proceed?
An “A” CAIVRS response is the only acceptable result for an applicant to be
eligible. The applicant will need to contact the federal agency involved to clear it.
A CAIVRS response of “A” will need to be obtained outside of GUS and uploaded
to GUS as part of the complete loan application. See Appendix 7 for instructions.
The applicant has an outstanding judgement. Can it be paid in full at closing?
A judgment may be paid off at closing as long as loan funds or seller concessions
are not used to pay off the debt. The declarations will need to indicate the
applicant has an outstanding judgment, since it is outstanding at loan
application. It is the lenders responsibility to ensure debts paid at closing are
paid with the borrower’s personal funds and that any state specific requirements
that may influence the validity of the first lien position have been considered.
H
ow is delinquent child support verified to determine if it is subject to
administrative offset? If CAIVRS is clear, is that sufficient?
Administrative offset allows for the interception of certain federal payments in
order to collect past due child support. As delinquent child support is not a
Federal debt, it is not reported to CAIVRS. Thus, a clear CAIVRS alone would not
provide evidence there is not an administrative offset in place.
Each state has an office(s) of child support enforcement. Wh
en a state refers
delinquent child support to the Department of Treasury, they simultaneously
report the delinquent child support to the credit bureaus. Lenders typically
discover delinquent child support from the credit report, and they should then
conduct due diligence to learn whether an administrative offset referral was
made by the state to the Department of Treasury. Verification from the child
support enforcement agency may be necessary to verify if the delinquent child
support is subject to administrative offset.
Lenders must document the loan file with verification an applicant with
delinquent child support is not subject to administrative offset. This can be
accomplished by obtaining verification in writing from the child support
enforcement Agency or, if obtaining a written verification is not possible,
documenting the loan file of the verbal conversation held.
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An applicant has 2 credit scores, with the third credit score frozen. Does the
third score need to be unfrozen?
Yes, applicants must ensure credit data frozen at any credit repository is made
available.
Can overdraft protection attached to a checking account be used as a non-
traditional tradeline?
No, overdraft protection is not a credit obligation and is not used as an
alternative trade line.
On a GUS Refer, the applicant only has one score. However, there are enough
trade lines to meet the credit score validation requirements. Are non-traditional
trade lines also required?
No, only one credit score is required as long as the credit score has been
validated.
On a GUS Refer loan, there are 2 applicants on the loan and the primary
applicant has a credit score and meets the requirements for a validated credit
score. The co-applicant does not meet the validation criteria. Can I proceed?
At least one applicant must have a validated credit score. The other applicant(s)
are not held to specific tradeline requirements.
On a GUS Accept file, the applicant does not meet the minimum trade lines
identified for a validated credit score. Are non-traditional trade lines required
to be obtained?
No, GUS Accept files do not require credit score validation. No further trade lines
are required.
An applicant has 2 trade lines reporting, one for 74 months and one for 9
months. A credit supplement showing the 12 months reporting on the second
account was obtained. Does this file need to be downgraded?
If the lender has a credit supplement showing a full 12-month history, they are
not required to downgrade the file. GUS Accept recommendations do not
require credit score validation.
An applicant has 3 accounts through their insurance agent, 2 vehicles and a
rental policy. Although they are 3 separate accounts, the applicant pays them
through one bill each month. Does this count as 1 non-traditional credit
tradeline or 3?
One combined bill counts as one alternative tradeline.
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If an applicant has 2 auto loans reporting for 8 months and 4 months each, can
we use the aggregate of that to meet the requirement of an account reporting
for 12 months?
No, you cannot use the aggregate of 2 accounts to report for 12 months. A
tradeline must have been opened for a full 12 months to be an eligible tradeline
for the purpose of validating a credit score.
Can my borrower use verifications from two different addresses to combine 12-
months rental history for non-traditional credit?
Yes, as long as the combined 12-month rental history does not have any gaps it
can be used for non-traditional credit. This guidance is specific to rental history
only.
An applicant previously had a USDA foreclosure. Are they eligible for a new
loan through Rural Development?
Attachment 10-A outlines the documentation that must be submitted as part of
the fully underwritten loan file when a previous Agency loss has occurred within
seven years prior to submission to the Agency. Rural Development will review the
information and determine the applicant's eligibility. There is no pre-approval
process available, the determination will be made after reviewing the complete
application package.
An applicant has medical collections which are disputed. Does the file have to
be downgraded because of the disputes?
Lenders may exclude disputed medical accounts and collections; therefore, no
downgrade is required.
If the credit report states an account was previously in dispute, but now
resolved, is it still considered a disputed account?
If the disputed account indicates the dispute has been resolved, it would no
longer be considered a disputed account.
An applicant has NSF fees reflected on bank statements. Is there anything
additional required?
NSF fees generally do not affect the applicant’s credit score, nor are applicants
required to have reserves. However, it remains the approved lender's
responsibility to review the credit history of an applicant to determine an ability
and willingness to meet their obligations.
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Are medical collections required to be paid?
No, Rural Development does not require medical collections be paid for any type
of submission (GUS Accept, Refer, etc.).
Do delinquent state taxes prohibit an applicant from qualifying?
Delinquent state taxes should be treated as an unpaid debt/collection. The
approved lender should evaluate whether the debt poses a threat to the first
mortgage lien and if it is likely to have an adverse impact on the equity or
applicant’s repayment ability.
Does an authorized user tradeline need to be removed from the credit report?
No, an authorized user tradeline does not need to be removed from the credit
report. An authorized user account is not taken into consideration in the credit
score. The lender will determine whether it should be excluded from liabilities.
Will Rural Development guarantee a loan where the applicant has less than 3
years from bankruptcy?
A guarantee is possible depending on the GUS Findings and overall file
documentation. If a GUS Accept is obtained, no further documentation is
required. If the results are a GUS Refer, the requirements of Chapter 10 would
apply, and a credit exception would need to be documented by the underwriter.
Is the requirement for 3 years from date of bankruptcy referring to 3 years
from application date or 3 years from note date?
The discharge date must be 3 years from the date of submission to the Agency to
not be considered adverse credit.
Is repayment on a 401K loan considered an acceptable non-traditional credit
tradeline?
401K loans are considered personal funds, thus not an acceptable source for non-
traditional tradelines.
One of the compensating factors for a ratio waiver on a refinance transaction
states, “Continuous employment with the current primary employer”. What
amount of time is required to use this compensating factor?
The Agency does not prescribe a minimum history in order to apply this
compensating factor to the credit analysis. The underwriter is advised to use
prudent judgement and sound business practices when requesting a ratio waiver.
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Does a Refer recommendation in GUS automatically require a credit exception?
A credit exception is only required if the refer is due to a credit issue or if the GUS
findings require a credit exception to be documented.
Employment/Income (HB-1-3555, Chapter 9)
The applicant currently lives with their significant other but indicates that
person will not be living with them in the home being purchased. Is a letter of
explanation indicating this sufficient?
Since the parties currently live together as a family unit, the income of the
significant other must be included unless evidence to support they have been
living apart for three months is obtained.
Do we need to request tax transcripts if we already have copies of the
applicant’s tax returns?
Yes, the lender must request tax transcripts in all cases.
The lender requested tax transcripts on an adult household member, however,
the response from the IRS indicated no tax returns were filed. The household
member is not required to file taxes based on his income level. Is this
acceptable?
Yes, the lender should retain the response from the IRS in their permanent loan
file as documentation.
Is there a maximum length of a job gap that is allowed?
No, there is no threshold or length of job gap specified in the Handbook.
Approved lenders are responsible for analyzing any gaps in employment to
determine stable and dependable income.
An applicant is separated from their spouse; however, it is not a legal
separation. What documentation would be required to exclude spouse’s income
from application?
The income of the spouse must be included unless evidence to support they have
been living apart for three months is obtained or court proceedings for divorce or
legal separation have commenced.
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Chapter 9 of HB-1-3555 states that a one-year history of earning commission is
required to be considered for repayment income. Is the one-year timeframe
required to be from the same job?
It is not required that the history of commission income is from the same job, but
it must be from positions within the same line of work. It is the approved lender’s
responsibility to analyze the complete income history to determine if there is
enough information to accurately calculate the income and determine the
income to be stable and dependable.
An applicant has been with their current employer for 8 months, earning base
wages and overtime. Previously, the applicant worked in the same line of work
for over 2 years and also earned overtime. Can we consider previous
employment history to meet the 1-year history of overtime income for
repayment purposes?
If the previous employment was a similar position, in the same line of work, the
underwriter may consider that in the history of overtime received. It is the
approved lender's responsibility to review the complete income history to
determine if the overtime is stable and dependable.
Can social security income received on behalf of a minor be included for
repayment income?
Benefits received by the applicant on behalf of a minor may be utilized for
repayment income as long as the income is received at the time of the loan
application, and it is confirmed to continue a minimum of three years into the
mortgage.
The non-purchasing spouse receives social security income on behalf of a
minor. Can this income be used for repayment purposes?
If the income is paid solely to the non-purchasing spouse, it cannot be used in
repayment income, even if it is deposited into a joint checking account.
Can a recent raise in income be considered for repayment income?
Increases in wages may be justified when the applicant's employment is stable
and dependable, as determined by the lender. If the increase is due to a
promotion with the same employer, then the underwriter has the discretion to
justify the increase based on the applicant’s employment stability.
Are mileage or per diem reimbursements included in income?
If the income is taxable income, it should be included in annual income and may
be considered for repayment income. If the income in non-taxable, it is
considered reimbursement and is not included in income calculations.
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An applicant finished college and began working at a job in the field of her
degree for the past 2 months. Can this income be considered for repayment
income?
Yes, the one year required history may be met through a combination of
employers, education, or military service. It is the approved lender’s
responsibility to analyze the complete income history to determine if there is
enough information to accurately calculate the income and determine the
income to be stable and dependable.
An applicant recently started a new job. Do they have to receive a paystub
before we can submit the loan application?
The lender must fully document the applicant’s income, which includes payroll
earning statements.
An applicant receives shift pay. Can this be included in repayment income?
If there is at least a 12-month history of receipt, it may be considered for
repayment income.
Are there specific requirements for applicants who work for a family-owned
business?
The lender is responsible for fully analyzing and documenting an applicant’s
employment/income. There are no specific requirements for instances when it
involves a family-owned business.
Are tax credits, such as the Child Tax Credit, included in annual and/or
repayment income calculations?
With the exception of the Mortgage Tax Credit Certification (MCC), tax credits are
not included in annual or repayment income calculations.
An applicant is in a new position, with less than 12 months of employment at
the current job. The previous employment was in a different line of work but
verified history with no gaps. Is this acceptable?
Changing lines of work does not automatically disqualify an applicant. The lender
is responsible for analyzing the applicant’s employment and income history to
determine they have 12 months continuity, as well as to determine if the current
income is stable and dependable.
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An applicant has been on the current job for 6 months and is required to work
mandatory overtime. Since the overtime is mandatory, can it be counted for
repayment income?
Even if the overtime is mandatory, a 12-month history of receipt is required to be
considered for repayment income.
Since the income calculation pages were removed from Form RD 3555-21, are
we still required to document adjusted annual income, annual income, and
repayment income calculations?
Yes, lenders are still r
equired to document adjusted, annual and repayment
income calculations in their permanent loan file. Lenders may utilize Attachment
9-B, Form 1008, or an equivalent. Submission of the lender’s calculations is only
required on manual submissions, and GUS Refer, Refer with Caution, and Accept
with Full Documentation recommendations.
Since the Verbal VOE requirement has been removed from the loan application
checklist, does this mean it is no longer required?
No, a Verbal VOE is required to be obtained within 10 business days of closing.
In most cases, this will occur after the application has been submitted to the
Agency in order to meet the 10-business day timeframe.
Gifts (HB-1-3555, Chapter 9)
Who is considered an eligible gift donor?
Gift funds may be received from any uninterested third party as long as the
documentation requirements of Chapter 9 are met.
A relative is serving as the buyer's real estate agent and would like to gift the
commission received from the transaction to the buyer. Is this an allowable
gift?
Since the relative is serving as the real estate agent in the transaction, they are an
interested party. Interested parties are not eligible gift donors. However, the
commission could be provided as an interested party contribution if the total of
all seller and other interested party contributions do not exceed 6% of the sales
price and represent an eligible loan purpose.
Can gift funds be used to pay off personal debt?
Gift funds are considered to be the applicant’s own funds; therefore, they can be
used to pay off personal debt.
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Can a gift donor give the gift funds directly to the title company or is it
required that the gift funds be deposited in the applicant’s account?
The gift funds can be provided directly to the title company, however, the gift
letter, closing disclosure showing receipt of the donor’s funds, or a copy of the
check/electronic transfer are required. Documents are required to be maintained
in the lender’s permanent file.
How do I enter gifts in GUS to ensure they are reflected in the transaction, but
not over inflating the reserves?
Gift funds should be entered in the “Gifts or Grants You Have Been Given or Will
Receive for This Loan” section of the “Loan and Property Information” GUS
application page. If the funds have already been deposited into an asset account,
select “deposited” and include the amount of the gift in the applicable asset
account on the “Assets and Liabilities” GUS application page. If the funds have
not been deposited into an asset account, select “not deposited” and do not
include the gift in an asset account on the “Assets and Liabilities” GUS application
page. Additional guidance for entering gifts can be found in the
GUS Lender
User Guide, located in the USDA Linc Training and Resource Library.
Can excess gift funds be returned to the applicant at closing?
Yes, gift funds are considered the applicant’s own funds, therefore, they are
eligible to be returned to the applicant at loan closing.
Liabilities (HB-1-3555, Chapter 11)
An applicant currently has student loans, however, if she continues to work for
her employer for the next 10 years, the student loans will be forgiven. Is a
student loan payment required to be considered in this scenario?
Yes, student loans in a forgiveness plan remain the legal responsibility of the
applicant until they are released of liability from the creditor. The applicable
student loan payment must be included in the applicant's monthly debts.
An applicant has student loan debt that is on an Income Based Repayment Plan
and currently has a $0 payment. Does the student loan still need to be included
in monthly debts?
Yes, when the credit report or creditor verification indicate a payment of zero,
lenders must use one half (.50) percent of the outstanding balance in the total
debt ratio.
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An applicant has student loan debt that is currently in deferment. Does the
student loan still need to be included as a liability?
Yes, student loans in deferment must use the payment amount reported on the
credit report, the actual documented payment when it is greater than zero, or
one half (.50) percent of the outstanding balance when the payment is zero.
Can an installment liability with less than 10 months of payments remaining be
omitted?
If the monthly payment does not exceed five percent of the monthly repayment
income, the debt may be excluded.
Can an applicant pay off a debt at closing to qualify?
Applicants may pay debts at closing as long as loan funds or seller concessions
are not used to pay the debt. It is the lender’s responsibility to ensure debts paid
at closing are out of the borrower’s personal funds.
An applicant is divorced, and the ex-spouse was given responsibility of a few
credit cards and an installment loan, evidenced by the divorce documents. The
debts are showing on applicant’s credit report and are paid as agreed with no
late payments. Can these debts be excluded?
Co-signed obligations must be considered in the total debt ratio unless the
applicant provides evidence another obligor has made the payment on time for
the previous 12 months prior to loan application.
An applicant is self-employed, and the business pays for multiple debts that are
on the personal credit report. Can these debts be excluded?
Business debts reported on the applicant’s personal credit report may be
excluded from the debt ratio if the debt is paid through a business account and
documentation is obtained to show the business paid the debts for the previous
12 months. In addition, the borrower must have included the debts in the
business profit and loss or cash flow analysis, to demonstrate that the liability is a
business liability and not a personal liability.
Do 401K loans need to be included as a liability?
No, loans pledging personal assets, such as a 401k account, retirement funds,
savings accounts, etc. do not require a payment to be included in the monthly
debts.
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Does the payment on an authorized user account need to be included as a
liability?
If the applicant is solely an authorized user and has no legal liability to repay the
debt, it may be omitted.
An applicant is self-reporting 3 utility bills on the credit report. Do these need
to be included?
No. Utility bills, even when self-reported on the credit report, are not required to
be included as liabilities.
Does the monthly maintenance fee for a timeshare need to be included as a
liability?
Yes, it is considered a long-term debt and may affect the applicant’s ability to
repay the loan.
A co-signed debt has only been open for 7 months; however, we have
documentation the other party has made all payments. Can this debt be
excluded?
No, a full 12-month history showing another party is paying the debt is required
to omit the payment.
Lender Approval and Resources
Lender Approval (HB-1-3555, Chapter 3)
Can any lender process guaranteed loans?
Lenders must be approved by Rural Development to participate in the
guaranteed loan program.
Is there an application fee to become an approved lender?
No, there is no application fee.
Where can I find information on how to become an approved lender?
HB-1-3555, Chapter 3 provides detailed information on the lender approval
process. Lenders can also contact sfhglpservicing@usda.gov
with any questions
on how to become an approved lender.
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Page 36
Once a lender is approved, is there a requirement to recertify?
The Agency will review the lender’s eligibility on a two-year basis and require the
lender to recertify their status by submitting an updated Attachment 3-A, Lender
Approval Checklist, with supporting documentation.
Is there a Rural Development contact to assist with questions on the lender
approval process?
Yes, questions on the lender approval process can be directed to
sfhglpservicing@usda.gov.
Resources
How do I sign up for email notifications of program updates?
You can sign up for our updates via GovDelivery using:
https://public.govdelivery.com/accounts/USDARD/subscriber/new
Where can I find HB-1-3555 which provides program guidelines?
The Technical Handbook can be found at
https://www.rd.usda.gov/sites/default/files/hb-1-3555_0.pdf
Who do I contact with general loan scenario and policy questions?
Policy questions can be directed to sfhgld.program@usda.gov.
Who do I contact to find out current turn times for applications?
Current turn times are posted on the SFH Guaranteed Lender page located at
https://www.rd.usda.gov/page/sfh-guaranteed-lender
Who do I contact to request a final GUS submission to be released back for
updates?
If the “App Status” found on the Loan List page in GUS is “Pending”, a lender with
appropriate permissions can recall the submission by selecting the “Recall Final
Submission” pushbutton in GUS, which will then provide a confirmation message
to confirm the recall action. Once a final submission is successfully recalled, the
submission status of the application will reset to “Unknown”, and the GUS
application pages will be available for data entry.
If the “
App Status” found on the Loan List page in GUS is not pending, the lender
will need to email the appropriate Production Team, based on the location of the
property. A list of Production Team contacts can be found at
https://www.rd.usda.gov/page/sfh-gu
aranteed-lender.
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Page 37
Who do I contact with questions on a file when the Conditional Commitment
has been issued?
File specific questions should be submitted to the Production Team that reviewed
the loan. A list of Production Team contacts can be found at
https://www.rd.usda.gov/page/sfh-guaranteed-lender
.
Where can I find information on how to enter data into GUS?
Guidance on utilizing GUS can be found in the GUS Lender User Guide, located in
the Training and Resource Library Website found at
https://www.rd.usda.gov/page/usda-lin
c-training-resource-library.
Does Rural Development provide training?
Yes, on-demand training is available on the Training and Resource Library
Website found at
https://www.rd.usda.gov/page/usda-lin
c-training-resource-
library. In addition, requests for personalized group training can be made by
contacting sfhgld.lenderpartner@usda.gov.
Is there a phone number I can use to talk to someone at USDA directly?
Lenders may utilize USDA’s Customer Access Lender Line (CALL), which is
available to provide turn time updates, as well as access to specialists and
analysts who are available to answer your questions on specific files, lender
recertifications and approvals, policies and scenarios, and GUS technical
questions. The toll-free number for CALL USDA is (833) 314-0168, which is
available from 9:00 a.m. to 3:30 pm ET. A full listing of Agency contacts can be
found by selecting “Download the Full GRH Contact Sheet” on the Guaranteed
Lender Website located at https://www.rd.usda.gov/page/sfh-guaranteed-lender
.
Who do I contact with loan servicing questions?
Loan servicing questions can be directed to sfhglpservicing@usda.gov.
Additional information on loan servicing can be located on the Training and
Resource Library Website located at https://www.rd.usda.gov/resources/usda-
linc-training-resource-library/loan-servicing.
