Rural Development Loan Guarantee

United States Department of Agriculture - Rural Development (RD) Mortgage Guarantee Program

Brief Description: The RD guarantee program provides a loan guarantee for homebuyers in rural areas, allowing an alternative to conventional loan products that often require large down payments. As of January 2006, all of Montana is eligible as a rural area, with the exception of the properties lying within the city limits of Billings, Bozeman, Great Falls, Helena and Missoula. The RD-guarantee program partners well with most down payment assistance and MBOH regular bond and set-aside loan programs.

Borrower Eligibility Criteria:
Income limits (click here)
First-time homebuyer(s); waived for targeted area
Home must be primary residence for the life of the loan
No asset limitations

Property Criteria:
Single family home, townhouse, detitled manufactured home on permanent foundation or condo unit (MBOH will purchase loans on up to 25% of units in a project).
Purchase Price Limit of $236,840.
Limit of 15% for business use.
Land limited to 35% of value of property on new construction that has private water or sewer.
Maximum parcel size of 40 acres, with no subdivision of land possible.
Must be in rural area eligible for RD loans.
Manufactured home must be new, from approved dealer, on a foundation engineered both site-specific and home-specific.

Loan Criteria:
Loan limit of $236,840 to which the RD guarantee fee can be added.
Rates depend upon finance option
30-year fixed rate loan
IRS recapture potential depending upon program used
Buy existing or build new home
Hazard insurance $1,000 deductible all peril; escrow for tax and insurance

Underwriting Criteria:
Per RD guidelines

Down payment Sources:
MBOH requires $1500.00 of closing costs or down payment to come from borrowers personal funds
Reduced to $500 for borrowers completing approved Home buyer Ed course
Other sources must be approved by RD

Lender Reservation and loan info:
MBOH regulates points and fees that can be charged. Consult Board staff with any questions.
Reservations are valid for 60 days for existing homes and 180 days for new construction
A 0.25% fee charged for extensions, 0.50% for cancellation
Need any multi-lot/repair issues on appraisal addressed before closing

Reservation Process:

 PREFER
Input on Lender On Line web based reservation system
Fax Borrow Stat Sheet and Homebuyer Education Certificate

OR
Fax reservation to MBOH including:
Reservation cover sheet and required documentation listed

updated 1/04/10

This is a summary of the MBOH program only. For a complete copy of the terms and conditions see Mortgage Purchase and Servicing Guide or Terms and Conditions for Whole Loans (December 23, 2009).