USDA Mortgages have become very popular for purchasing a home. The program has more lienant guidelines than a Conforming Loan. The program typically comes in a 15 yr or 30 yr term. It has fixed interest rates.
USDA loans are also called RD or Rural Development. They do not require a down payment. They also do not charge you Mortgage Insurance.
There are 2 types of loans USDA offers:
Direct (Payment may be subsidized for low income)
Guaranteed (Most common)
USDA has requirements for the property you are purchasing. Usually these requirements are items attached to the home have to be in working order and not cause a safety issue. The appraiser of the home determines whether a loan is acceptable for USDA financing. If the property needs repairs it may be possible to finance only the required repairs into your loan.
USDA has property location restrictions and borrower income restrictions. It typically is available in rural area's. However, some cities are eligible that one would think are not. The site where you can find out if a property is eligible or if your income qualifies is located here.
The USDA site has links on the left side for property and income eligibility. It will guide you through finding out if your income and the property you wish to purchase are eligible.
USDA is very liberal regarding income restrictions. It depends on the size of the family occupying the home. All household income must be used in the income calculation. It will be a requirement to show income for all occupants of the home even if they are not an owner or not obligated to the loan.
|
FHA may require that you pay Mortgage Insurance. The insurance is paid to the government and insures loans against default. There are 2 types of insurance.
- Up Front Mortgage Insurance (UFMIP)
- Monthly Mortgage Insurance (MI)
FHA Mortgage Insurance is not PMI because it is not privately insured. It is insured by the government. The premium you pay depends on the term of the loan and the loan to value ratio (LTV). The up front amount you pay is always 2.25% of the loan amount unless you are refinancing an existing FHA Loan. The monthly amount is a % of the loan amount divided by 12. That equals the monthly amount you pay.
FHA requires that if you are required to pay a monthly premium you must pay it for a minimum of 5 years. The monthly premium no longer has to be paid after 5 years if you have paid your mortgage balance down to 78% of:
The current monthly rates are:
.55% for a 30 year term over 95% LTV
.50% for a 30 year term under 90% LTV
.25% for a 15 year term over 90% LTV
Not required for a 15 year term under 90% LTV
|
USDA Purchase:
- No Minimum Down Payment
- 102% Financing (If 2% funding fee is financed)
- No sourcing of funds used for closing
- Unlimited Seller Contributions (Lenders usually cap them at 6%)
- Purchase With Rehab (Items needed to make property acceptable to USDA standars only)
- Higher Debt Ratio Allowed
- More Flexible Guidelines
|
|