Pines properties may no longer be eligible for low, moderate income program

By Brian Gilliland, Associate Editor

(Jan. 25, 2018) Every five years the U.S. Department of Agriculture reviews the eligibility of certain areas for its USDA Rural Home Loan program, and one of the areas under review this year is Ocean Pines.

The USDA loans are attractive to homebuyers and lenders because a portion of the mortgage is guaranteed by the federal government, giving lenders more confidence in the ability of the applicant to repay the loan.

This confidence also plays out in the interest rate, which is favorable to the buyer and also allows the home to be financed completely without a down payment being required.

There are, however, some restrictions involved. The basic requirements are credit, income, property usage and home location.

While there is no minimum credit score required for USDA loans, those with scores above 640 are eligible for automated underwriting, which is faster among other benefits, and those below that threshold have to submit to manual underwriting — a longer and generally more thorough process.

As for income, the USDA must establish a verifiable income stream that is likely to continue, and as the loans are intended for low-to-moderate earners it sets a base income limit at 115 percent of the median household income for the area.

The loans are also intended for use in rural areas, but the definition of rural in this context is intentionally vague, and according to the USDA, includes almost all of mainland Worcester County. All of Ocean City, coastal areas of West Ocean City on south to South Point are excluded, according to current rules.

Finally, the home in question must be used as a primary residence, have direct access to a street and must have adequate utilities including water and wastewater disposal.

“In the past 27 months of opening my own Real Estate Brokerage in the community of Ocean Pines the USDA loan product has provided an interracial path to home ownership for our local residents including renters, first-time home buyers and families,” Bernie Flax, president-elect of the Coastal Association of Realtors, wrote to the USDA. “It has also been a path for me as a local small business owner to build my business and help my local community.”

Current president of the Coastal Association of Realtors, Joel Maher, echoed Flax’s concerns, and backed them up with some data.

“… [A]ccording to our Multiple Listing Service data, the median sale price of a single-family home in Ocean Pines in 2017 was $235,000, which is markedly lower than the national median price throughout the same time period of $315,800, as reported by the National Association of Realtors,” Maher wrote. “Also according to our data, over the past two years, a total of 882 homes have been sold in Ocean Pines. Of those homes, 522 were priced under $250,000.”

Maher wrote he was concerned the Ocean Pines market would be mistaken for Ocean City demographics.

“The Ocean Pines market may include some pricier waterfront properties that are utilized as vacation homes, but most of the community are primary residents who work in Worcester County or the surrounding areas,” he said.

At the state level, the Maryland Department of Housing and Community Development announced new loan and down payment assistance programs on Tuesday, including a loan developed for borrowers with mid-range credit scores, a down payment assistance grant and the expansion of another down payment grant to be used for more types of mortgages.

For more information on these programs, visit mmp.maryland.gov.