USDA Rural Development backed loans

[paulsharvey]

Wife and I have been casually looking for new house/property for about 2 years now, but going to start getting serious. We have been held back by the difficulty of buying land for a new manufactured or modular home. The bank we found that could finance said Land Only loan was 20% down, max length of 10 years. Been looking at other options, for financing.

USDA Rural Development backed loan seems like a great option, but does anyone know if the income guidelines are based on Gross or Net income? The 0% down payment would be awesome.

Also, I know you Must make the new home your primary residence within 30-60 days; can I keep the old home for a period, to fix, clean up, prior to putting it on the market? 1st home does have a mortgage, but the payment is a joke; our combined phone bills are higher then the mortgage.

I understand this type loan can be used for multiple things; land, home, mobile home ect; with less stringent max acres then a typical mortgage, but can it be used for a "construction" loan, to combine land and newly ordered manufactured home?

We have a pretty restrictive list of what we want; Land- min 5 acres, prefer more; no HOA; in same county (preferably in same school zone); water access (preferably on a lake/large pond, but wife might accept something else); 4 bed/2+ bath; if a mobile home is existing, new or less then 5 years old. In my area, land of 5+ acres is easy to find and cheap; and land on water is cheap and easy to find; 5+ acres on water is very hard to find or will cost 10x what land without water costs.

When I talked to a bank; first question was are you A: buying land; B: buying land and building/manufactured; or C: buying a house with land; they are completely different situations and until you find the place, we don't know...

 

[Have tractor did travel]

Almost surely, net income. Lender's want to see how much uncommitted money you have. - discretionary income to spend as you like.

You can keep the old home. Primary home is - where do you rest your head, keep personal effects, etc., address on driver's license, your intent. Definition would vary with individual. From intent you have communicated, your new home will absolutely be your primary home.

That Zero (0) money is "awesome" indicates lack of saving. Lenders will want to see how you're going to make the payments from your net income.

A mobile home will depreciate. A modular home will appreciate. Except in unusual circumstances.

 

[Fxfymn413]

Find a good realtor in your area and ask those questions.

 

[paulsharvey]

With the prices of homes and all now; I don't know how anyone is making 20% payments.

But, if we could avoid a large down payment, that would give us the flexibility to move out of the current place and make repairs, clean property, ect; and when placed on the market, I think it would do Way better then it does now.

As many of us, I'm sure, the woods on my property is full of old 'project' mowers, Atvs, ect; sheds/chicken coops that probably need demo'd, ect. The house needs some work, but that is 100% easier to do when your not living in it. Once sold, the 1st home equity could be used to pay off other debts, and/or used to pay down a portion of the new place.

I know that in theory, I could set up 1st house as a rental, and make way more then the payment, but I don't want to mess with that. I dont want to deal with renters.

House 1, we bought in 2009, during the apocalypse. It was cheap, and fit what we needed at the time; but we have out grown it.

 

[RickB]

Get busy and start cleaning up your property now before your plate gets really full. We planned a long distance relocation for years then started editing and cleaning a 30 year accumulation about 2 years before we moved out. I'm sure it was much less stressful than waiting till the last month.

 

[jaydee325]

When purchasing additional property (land to build on or land and existing house), lenders will look at your debt to income ratio. If your debt to income ratio is unfavorable, you may not qualify for mortgage products that allow low down payments or favorable interest rates.

Finding a good mortgage lending institution and discussing your needs and amounts to borrow is recommended here. Don't allow lenders to pull your credit score until you are ready to make the deal. More than 3 pulls over 2 years has a negative impact on credit score. A low credit score will disqualify you from the more favorable lending terms and in some cases, cause higher insurance rates as well.

 

[paulsharvey]

Debit to income is in good shape and credit is mid-good. I just have know some people get themselves into trouble selling and buying new or manufactured. Their house sells fast, and construction isn't done. They either have to work out a weird 'rent back' on their old home, rent for a period, or move in with family.

I am not in Vertical construction anymore, all infrastructure, but part of that overlaps with home contractors, and lately, your looking at 9 months for a site build single family, and often 7+ months order to occupancy on manufactured.

 

[MossRoad]

Wife and I have been casually looking for new house/property for about 2 years now, but going to start getting serious. We have been held back by the difficulty of buying land for a new manufactured or modular home. The bank we found that could finance said Land Only loan was 20% down, max length of 10 years. Been looking at other options, for financing.

USDA Rural Development backed loan seems like a great option, but does anyone know if the income guidelines are based on Gross or Net income? The 0% down payment would be awesome.

Also, I know you Must make the new home your primary residence within 30-60 days; can I keep the old home for a period, to fix, clean up, prior to putting it on the market? 1st home does have a mortgage, but the payment is a joke; our combined phone bills are higher then the mortgage.

I understand this type loan can be used for multiple things; land, home, mobile home ect; with less stringent max acres then a typical mortgage, but can it be used for a "construction" loan, to combine land and newly ordered manufactured home?

We have a pretty restrictive list of what we want; Land- min 5 acres, prefer more; no HOA; in same county (preferably in same school zone); water access (preferably on a lake/large pond, but wife might accept something else); 4 bed/2+ bath; if a mobile home is existing, new or less then 5 years old. In my area, land of 5+ acres is easy to find and cheap; and land on water is cheap and easy to find; 5+ acres on water is very hard to find or will cost 10x what land without water costs.

When I talked to a bank; first question was are you A: buying land; B: buying land and building/manufactured; or C: buying a house with land; they are completely different situations and until you find the place, we don't know...

I'd ask them about blanket mortgages. That's how we financed our vacant land, and our 2nd house.

The land was $30K.
The lenders wanted 20% down on vacant land.
20% of $30K is $6K.
We owned our $30K house outright.
We combined the value of the land plus the value of the house under 1 blanket mortgage.
$30K land + $30K house = $60K in total mortgage.
Since we had $30K in equity in the house, we already owned 50% of the equity in the $60K blanket mortgage.

50% equity = 50% down.

They only required 20% down for the land.

We got the land with NO DOWNPAYMENT.

The only requirement was that when if we sold the house out of the blanket mortgage, we had to give the lender at least enough to bring up the equity in the mortgage to 20%.

It sounds shady, but is perfectly legal.
It might be worth a look for you.

https://en.wikipedia.org/wiki/Blanket_loan

 

[MossRoad]

We did the blanket mortgage again when we bought our 2nd home.

Again, the lender wanted 30% down.

We owned our $30K home.
We bought a $65K home.
20% down on a $65K home = $13K.

The blanket mortgage was for $95K.
Since we already had $30K of the $95K in equity (that's about 36%), we didn't need 20% down.
We bought the 2nd house with NO MONEY DOWN.

Again, only stipulation was that when we sold the 1st home, we had to give the lender at least 20% of the $65K cost of the 2nd house. That was $13K.

We took about 5-6 months to remodel the 2nd house, moved into it, and sold the 1st one. Gave the lender more than enough to cover the 20%.

It worked out very well twice for us.

Good luck in your search.

 

[dmccarty]

Look at different financial institutions. Don't just try one.

Our credit union would not finance our big land purchase. They would provide loans for lot sized property but not large land purchases. I was lucky in that a coworker's spouse was a loan officer at a bank and that bank provided the loan. When it was time to build the house, the bank was much easier and cheaper to work with than the credit union. Go figure.

The bank got the big land purchase, funded the house build, the house mortgage, and a few ReFi's along the way. Ironically, for the last ReFi, the credit union was the best value. The land loan is long paid off and the other loans provided the bank with good income from us, but for some reason, the credit union had the better deal this time. Go Figure.

For the land loan the bank did not ask what kind of house we were going to build, and at the time of the land purchase, the type of house and where we would put it, was all up in the air. We did look seriously at modular but did not go down that path. The bank did not care if we put a modular on the land or went with stick built.

Later,
Dan