The USDA program is very small. It originated just over 132,000 loans last year, less than 2 percent of the overall mortgage marketplace, according to the Mortgage Bankers Association. It has expanded in recent years, however, as the definition of “rural” bleeds into the nation’s exurbs.
The loans require a 2 percent insurance fee, but that cost may be added to the loan size during closing, as can costs of eligible home repairs and improvements, according to Dan Green of Waterstone Mortgage in CIncinnati.
That is not allowed with Fannie Mae or Freddie Mac loans. The annual insurance is about a quarter of what the Federal Housing Administration (FHA) charges to back loans.
(Read more: Fannie, Freddie making billions—why shut them down?)
The Maloys learned that the hard way, as their only option was to switch to an FHA loan. Instead of a no-down payment loan that would cost $1,400 a month, they must now put $10,000 down. The FHA loan also will cost them $150 more each month in fees. The FHA is a government mortgage insurer, but most lenders can process its loans electronically, even during the shutdown.
“We just had to do what we had to do, and that’s the decision that I have to make, so that my kids aren’t homeless,” said Tom, emphasizing that while he and his wife both work, together they don’t earn six figures. “I can’t give them everything I promised to give them now, but they’ll have a home.”
The USDA program may seem insignificant, but the longer the shutdown goes on, the more its absence hurts.
(Read more: Homebuyers have a jumbo problem)
Article source: http://www.cnbc.com/id/101110377