USDA Loan Boundary Changes Effective October 1st 2013

Late Breaking News 9-10-13

"Please see updated information at the bottom of this posting"

The USDA loan is popular with many people who are interested in buying a home because it is one of the few loan products that offers true 100% financing and has no mortgage insurance. Those are 2 of the most popular reasons that people love it – so why doesn’t everyone have a USDA loan? Because USDA guidelines require that the home is located in an area that is designated a “rural” geographical area. Note: just because it is designated as a “rural” area doesn’t mean that there isn’t a stoplight within 10 miles … many “rural” designated areas are in fairly populated areas.

2010 Census Cause For Change

In the US, a census is done every 10 years. The 2000 and 2010 census provided at least one interesting data point – that many people have moved closer to populated cities and away from highly rural areas between 2000 and 2010. As a result of this move in population base, many areas will exceed the population limits set by USDA for an area to be considered “rural” – so the USDA loan program will not be offered in those areas as of October 1, 2013 (unless of course an act of Congress happens and extends the date – which is entirely possible).

2013 USDA Boundary Changes Will Impact Many Areas

The Housing Assistance Council estimated that as a result of the shift in population moving to more populated areas, as many as 500 geographical areas that are currently designated “rural” by USDA will no longer be designated “rural” and thus be ineligible for people to get USDA loans in those areas.

An Estimated 500 USDARD Eligible Areas Could Potentially be Reclassified as Ineligible Based on Population Estimates and Thresholds. Using recently released population figures from the 2010 Census, the Housing Assistance Council assessed the potential impacts of population change on USDA?RD eligible area classifications. HAC’s analysis estimates that 500 places (cities, town, villages, etc.) currently classified as USDARD eligible areas may exceed statutory population thresholds and could potentially be reclassified as ineligible territory on the basis of their population threshold alone.

The identified 500 places with the potential of losing their USDARD eligible area status encompass approximately 10,132 square miles, constituting a possible .3 percent reduction in the current eligible area land mass nationally.

Additionally, there are an estimated 9.1 million people living in these potential reclassification areas, which could reduce the total current USDA?RD eligible areas population (not program or income eligible population) by roughly 8 percent.

Potential Changes are Greatest in Metropolitan Areas. USDA RD’s rural areas definition includes differing eligibility thresholds based on OMB designated Metropolitan Area status. Generally, places within Metropolitan Areas must have a population below 10,000 to be considered a USDA eligible area. Places outside of Metropolitan Areas can have populations up to 20,000 and still be eligible, if certain other conditions are prevalent. Approximately 90 percent of the identified USDA eligible areas that are potentially impacted by population change are located in Metropolitan areas.

See The Difference Between Now and The Future

What will the difference be between now and the future? Well, if you compare what it is scheduled to look like after October 1, 2013 and compare it with what is currently available (as of April, 2013) – you can see that there are significant changes in more than just a handful of metro areas including:

Las Vegas
Seattle
Dallas
Phoenix

Current USDA eligibility map

USDA eligibility map starting October 1, 2013

Here is a snapshot of the Pierce & So. King County area of Washington State, which shows a much larger future ineligible lending area vs. current eligible areas.

What this means in simple terms: if you are planning on buying a home in an area that is going to be impacted by the upcoming USDA loan eligibility changes, be sure to get your loan application in before you are too late and end up having to go with a different type of loan program other than a USDA loan.

USDA Loans: Get The Best Deal

There is one simple way that you can get the best deal on a USDA loan – shop multiple USDA lenders. Getting a quote from multiple USDA lenders will allow you to get a written estimate of your loan and see what the fees, rates and guideline overlays are for your situation. You might be surprised at how much different each loan quote can be.

Get started RIGHT HERE by submitting your information and get a quote from our team at Sound Mortgage a direct USDA lender who can help you today.

Updated Information 9-10-13:

In a conversation today with our direct USDA Lending Representative, He felt that the proposed changes would not go into effect in October as proposed. This is good news for the markets that would be effected by the changes. Let's hope he is correct! Every year around the end of September early October, USDA runs out of funding monies to provide lending commitments on new home loans, this causes closing delays for most lenders until the funding is re-established by congress.

Sound Mortgage is a direct USDA lender and will fund these loans on our bank line and retain them until congress re-establishes funding. We will not experience any interruption in funding USDA loan files in process or new purchase deals, regardless of when congress passes a continuing resolution (as they have for the past 4 years)