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5.2 REQUESTING A GUARANTEE [7 CFR 3555.151]
Not all loans are appropriate for the SFHGLP. The lender should determine whether, based on preliminary information, it appears that the loan will meet the program’s criteria. The lender should answer the preliminary eligibility questions below to assist in making this determination. The lender should also ensure that the applicants are fully informed about the requirements of the program.
A. Preliminary Determination of Applicant Eligibility
In general, the program is most appropriately used to offset the risk of making high loan-to-value loans in rural areas. It is not intended to offset risks that stem from a poor credit history or poor property condition. In particular, the lender should review the following items to make a preliminary determination of the applicants’ eligibility.
x Applicant Characteristics (Chapter 8) Are the applicants able to secure
conventional credit? Do the applicants own a dwelling? Are the applicants U.S. citizens or eligible non-U.S. citizens as detailed in Chapter 8? If the applicants are not U.S. citizens, they must produce evidence per Agency guidelines to qualify as a non-U.S. citizen.
x Income (Chapter 9) At the time of loan approval, is the household's adjusted
income below the applicable moderate-income limit? To determine eligibility for the SFHGLP, the lender is responsible for documenting the income of all adult members of the applicants’ household (not just those who will be signatories to the note). Current income limits are referenced in Appendix 5, and can be located on the USDA Income and Property Eligibility website at
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http://eligibility.sc.egov.usda.gov/eligibility/, or by using the Agency’s automated underwriting system, GUS.
In addition to meeting adjusted annual income requirements, the applicants must also have sufficient repayment income and meet additional program requirements. Chapter 9 provides more detailed information about annual, adjusted, and repayment income.
x Credit (Chapter 10) Is the credit history consistent with program guidelines?
The applicants must have a credit history that demonstrates the ability and willingness to repay the loan. GUS is unable to render an underwriting recommendation on supplemental credit reports. These should be uploaded with the application package.
x Ratios (Chapter 11) Do the applicants’ PITI (Principal, Interest, Taxes and
Insurance) and total debt (TD) ratios fall at or below the limits established by the Agency? Ratios are calculated using repayment income from applicants who will be a party to the Promissory Note.
x Appraised Value/Loan amount (Chapter 12) Is the loan amount supported by
the appraisal’s fair market value? If there is not yet a current appraisal, is the loan amount expected to be supported by the appraisal?
x Site and Property (Chapter 12) Does the property appear to be in an eligible
rural area as designated by program guidelines? If warranted, did Agency staff confirm that the property location was rural? The Agency encourages lenders and those involved in the origination package to verify a property’s eligibility on the Agency’s property eligibility website. Property eligibility may be checked online at http://eligibility.sc.egov.usda.gov/eligibility/, or by using the Agency’s automated underwriting system, GUS.
B. Informing the Applicant Before requesting a loan guarantee, the lender should take the following steps to ensure that applicants have a general understanding of the SFHGLP.
x Concept of a loan guarantee. Describe to the applicants what a loan guarantee
is, why it is used, and the benefits of a loan guarantee. Benefits include, but are not limited to, no required down payment and a fixed interest rate.
x Loan guarantee fee (Chapter 16) Inform the applicants of the upfront guarantee
fee to be paid at loan closing.
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x Annual fee (Chapter 16) Inform the applicants of the annual guarantee fee, if
applicable.
x Occupancy (Chapter 8) Inform the applicants that they must occupy the property
as their principal residence.
x SFHGLP requirements. Inform the applicants of program requirements such as
income limits, property location eligibility, debt ratio thresholds, and other requirements such as the certifications outlined on Form RD 3555-21, Request for Single Family Housing Loan Guarantee.