Rural
Housing Initiative
The Rural Housing Initiative targets
individuals/families with income at or below 65% of county median income (income
limits determined by IHDA). Applicants must be first time homebuyers or not
have owned a home within three years. This program will serve the rural
counties of Illinois. Cities of population less than 20,000
(10,000 outside a metro-statistical area) are eligible. The Illinois Housing Development
Authority (IHDA) will supply fixed rate mortgage funds, current interest rate
will be posted at http://www.pfho.org. United States Department of Agriculture
Rural Development (USDA
RD) will guarantee these loans. New program guidelines are effective
April 1, 2008.
REALTOR®, REAL ESTATE AGENT & LENDER
CERTIFICATION
The Partnership for Homeownership, Inc. (PFHO) will
certify REALTORS®, real estate
agents and lenders for participation in the Rural Housing Initiative.
Certification is required for all real estate agents. Lenders who wish to submit applicants
must also be certified.
Certification can be done on-line at www.pfho.org
APPLICATION
PROCEEDURE
Potential homebuyers must work with a PFHO certified
REALTOR® or real estate agent.
The certified REALTOR® or agent assists potential
homebuyers in completing the Foundation’s standard application form. The form certifies the applicant is
working with a participating REALTOR® or agent, said REALTOR® or agent has pre-qualified the
applicant, applicant understands the requirements of the initiative, applicant
authorizes PFHO to run a credit report.
The typed or printed application along with the corresponding application
fee of $35 should be mailed to the Partnership for Homeownership,
Inc. Following a credit review,
qualified applicants will be notified by the PFHO of their placement into a
pre-purchase homebuyer counseling class at one of the PFHO’s Homebuyer
Counseling Centers. Applicants with
credit issues may be contacted by PFHO staff to address said issues. If credit
issues are of a serious nature the applicant may be considered ineligible for
participation. A minimum score of
620 is required by IHDA.
PRE-PURCHASE
HOMEBUYER COUNSELING
PFHO sponsored pre-purchase homebuyer counseling is
required of all applicants prior to entering into a contract to purchase a home
(if married, both husband and wife or any two individuals applying jointly must
attend). Upon completion of pre-purchase homebuyer counseling, the applicant
receives a certificate qualifying them for participation in the initiative.
The certificate does not guarantee loan approval. A schedule of homebuyer counseling
sessions is available at http://www.pfho.org.
INCOME
LIMITS
Borrower household income cannot exceed 65% of county
median income. On a case-by-case basis, the lender may consider additional
non-seasonal, part-time income with less than two years, but not less than one
year, of history. The employer must verify the continuation of part-time
employment. Verification of alimony or child support income for qualifying
purposes is not restricted to divorce decrees or separation agreements. Other
forms of verification are acceptable so long as they verify the amount received,
can demonstrate two years of past history and the continuation of income for a
minimum of two years.
COUNTY
MAXIMUM HOUSEHOLD INCOME LIMITS
(PERSON)
(1)
(2)
(3+)
Kendall
$60,000
$68,000
$77,000
(limited eligible areas)
DeKalb, Grundy, McLean, Kane
$55,800
$63,800
$71,800
All other Counties
$48,000
$54,800
$61,700
BORROWER
INCOME
Lenders must verify income for two consecutive years
under normal circumstances, and three consecutive years following a
bankruptcy. Applicants must provide
the lender 3 years of income tax returns.
Those self employed must provide 2 years of profit and loss
statements.
CREDIT
HISTORY
A record of good credit must be established over a
three year period following a bankruptcy, two years following other credit
problems. Any outstanding collections must show paid. Large medical collections must have a
written repayment agreement and 6 subsequent on-time payments. That payment will be considered an
installment debt and included in their debt ratios. Lenders must develop a credit history
for borrowers who normally do not use credit (verification from utility
companies, current/previous landlords, car insurance premiums, cell phones and
other sources of credit/service where the individual was/is required to meet
regular financial obligations).
HOUSING DEBT
TO INCOME RATIOS
In general, ratios should not exceed 29/36. However,
it is acceptable for ratios to exceed 29/36, when the following conditions
exist: borrower has a history of
maintaining a high debt load, borrower has demonstrated an ability to repay debt
in a timely fashion, borrower has a history of income
stability.
MORTGAGE
TYPE
Maximum 30 year, fixed rate, level payment
mortgage. Interest rate will be
posted daily on the PFHO Web site at http://www.pfho.org. It is anticipated that the rate will be
approximately 25 basis points below market rate.
ELIGIBLE
LENDERS
Lenders must be IHDA/USDA RD
approved.
DOWNPAYMENT
Homebuyers must contribute a minimum of 1% of
purchase price or $1000, whichever is higher, verified at time of application
(homebuyer contribution must come from the buyer’s own funds, and cannot be a
gift). Additional downpayment can
be from grants or gifted. Earnest
money as well as loan application fees can be counted towards downpayment.
MAXIMUM PURCHASE PRICE
COUNTY
CONSTRUCTION
NEW
EXISTING
DeKalb, Grundy, Kane, Kendall
$325,890
$325,890
St. Clair, Clinton,
Jersey, Madison, Monroe
$253,120
$253,120
All other Counties
$237,030
$237,030
CLOSING
COSTS
Normal closing costs—3 months escrow. A USDA RD
Guarantee Fee of 2% to be paid at closing. Note, these loans require no
private mortgage insurance. A $250
Counseling fee to be paid to PFHO at closing. Seller may assist with closing
costs, closing costs may be financed (the house must appraise for the higher
loan amount plus down payment).
ASSETS
Homebuyer cannot have more than 5% of the purchase
price remaining in cash assets in bank accounts after closing, unless designated
for specific pending expenses. This does not include 401K, pension plans, or
other long term investment vehicles.
LOAN
APPROVALS
Homebuyer must submit their certificate of completion
of PHFO sponsored pre-purchase homebuyer counseling to lender. Lender in turn attaches original
certificate to the loan application. Lender should reserve both loan amount
and grant monies at time of application.
IHDA will provide a standard letter of approval or rejection to the
applicant and the lender. In cases
of new construction Lenders can lock the interest rate for up to 9 months for an
additional 1% paid up front at time of loan approval. Actual loan amount can be adjusted at a
later date. (Note to lenders: both IHDA and USDA RD forms must
be submitted with loan file). USDA guarantee letter must be provided to IHDA
prior to loan approval.
ELIGIBLE
PROPERTIES
Single family dwellings (existing housing and new
construction). All existing homes
must meet PFHO’s insulation and weatherization requirements. The USDA RD required inspection report can be
used by a licensed inspector, a comparable inspection report is acceptable by a
licensed inspector, or an appraiser can complete their appraisal report and note
the thermal requirements in the comments section. Property site value cannot exceed 30% of
total property value or 5 acres.
All homes must have a minimum 100 amp service and a roof life-time of
at least 5 years.
REPAIRS
Homebuyer may negotiate with the seller or lender to
build major repairs into the loan amount.
However, the house must appraise for the higher loan amount plus
down-payment. Repairs, such as a new roof or furnace, will require 1 1/2 times
the accepted bid or the highest of 3 bids to be escrowed at closing. This MUST
be written into the contract, done either as “seller agreed to repairs” or as
part of a financing contingency in which the amount financed includes the money
necessary for repairs. Repairs must be completed within 60 days after closing
and will be paid out by the lender or escrow agent (excess funds will be applied
against the loan principal, or may be used for other small repairs). There is no “cash-out” for the
borrower. This is not a rehab
loan! Repairs are limited to safety and soundness only. More than two major
repairs may eliminate a house from the program. Note, funds are not available
for kitchen remodeling or carpeting.
NEW
CONSTRUCTION
For newly constructed dwellings, the CABO Model
Energy Code—1992 Edition is an acceptable thermal standard in lieu of Rural
Development’s insulation requirements for existing dwellings. The builder’s
architect, engineer or a local code official may provide this information on a
“Plan Certification” form. In addition, Rural Development guaranteed lenders
will ensure that the following three (3) inspections are
performed:
- When footings and foundations are ready to be
poured, but prior to back-filling (FOOTING INSPECTION);
- When shell is closed in but plumbing, electrical
and mechanical work are still exposed (FRAMING INSPECTION);
- When construction is completed prior to occupancy
(FINAL INSPECTION).
The first two inspections (FOOTING/FRAMING) are
not required when the builder supplies an insured 10 year warranty plan
acceptable to Rural Development. Additional inspections may also be required by
the lender at their discretion.
When a newly constructed dwelling does not meet the above requirements,
Rural Development can issue a guarantee so long as the loan amount does not
exceed 90% of the appraisal.
Modular homes do not have to be purchased new to be eligible for
financing. Rural Development’s definition of “modular” is a home assembled
off-site built to local codes (International Residential Code, CABO or BOCA) and
PFHO’s thermal standards.
Manufactured housing
Must be purchased new from a USDA RD approved
dealer/contractor (see list). Eligible “manufactured” housing must have a
minimum 5-12 pitched roof, an 8” fixed eave overhang, 2” x 6” exterior wall
stud, and be built on a permanent foundation to HUD’s Federal Manufactured Home
Construction & Safety Standards.
Interior of home must be fully finished dry wall, no vinyl covered wall
panels. Lenders will require
manufactured building specifications at time of loan application to verify
requirements. We cannot grant
exceptions.
Rural Development requires that dwellings financed
with a guarantee must be structurally sound, functionally adequate, and placed
in good repair prior to issuance of the Loan Note Guarantee. Existing dwellings must have a remaining
Economic Life for at least 30 years or life of the loan. A termite inspection and necessary
treatment must be completed by a licensed Pest Control
Agency.
Lenders may request a Loan Note Guarantee when an
Escrow Account for repairs is established.