Posted on: 28th Apr, 2009 05:42 pm
I'm borrowing 130,000 for my first time home loan. I have been given the option of taking an FHA loan or a USDA rural development loan (since the home qualifies). From my understanding, the FHA requires 3.5% down in MI...the RD loan does not. Seems like a no brainer...right?
Is there any drawbacks to a rural development loan. Thank you.
Is there any drawbacks to a rural development loan. Thank you.
They are, in fact, 2 different loans - one with the US Dept of Agriculture and the other with the Fed Housing Admin, or HUD.
Both programs are government programs. Only USDA goes to 100% and has no MIP or PMI.
- To be eligible for rural housing is based on geographic location.
-The cool part about Rural development is that if you have $100,000 purchase price but the appraisal came in for 103,000 you can have a loan amount of $103,000 and roll the $3,000 to the closing costs. That's the niche that RD has.
-And the underwriting actually is not much different from a regular FHA loan. Very similar.
General Program Requirements
In order to qualify for this benefit program, applicants must have very low-, low- or moderate incomes. Very low-income is defined as below 50 percent of the area median income (AMI); low-income is between 50 and 80 percent of AMI; moderate income is below 115 percent of AMI. Families must be without adequate housing, but able to afford the housing payments, including principal, interest, taxes, and insurance (PITI). Qualifying repayment ratios are 29 percent for PITI to 41 percent for total debt. In addition, applicants must be unable to obtain credit elsewhere, yet have an acceptable credit history. You must also be a US citizen or permanent resident
Both programs are government programs. Only USDA goes to 100% and has no MIP or PMI.
- To be eligible for rural housing is based on geographic location.
-The cool part about Rural development is that if you have $100,000 purchase price but the appraisal came in for 103,000 you can have a loan amount of $103,000 and roll the $3,000 to the closing costs. That's the niche that RD has.
-And the underwriting actually is not much different from a regular FHA loan. Very similar.
General Program Requirements
In order to qualify for this benefit program, applicants must have very low-, low- or moderate incomes. Very low-income is defined as below 50 percent of the area median income (AMI); low-income is between 50 and 80 percent of AMI; moderate income is below 115 percent of AMI. Families must be without adequate housing, but able to afford the housing payments, including principal, interest, taxes, and insurance (PITI). Qualifying repayment ratios are 29 percent for PITI to 41 percent for total debt. In addition, applicants must be unable to obtain credit elsewhere, yet have an acceptable credit history. You must also be a US citizen or permanent resident
Hi,
FHA or a USDA Loan both is good for who has low score.
Rural development has no down payment requirement or monthly mortgage insurance payments as opposed to FHA. USDA Loan is more better that FHA loan.
USDA is a better loan as it is 100% financing and no PMI, but it is generally easier to get a an FHA done, meaning FHA will take lower scores or worse credit,
Ihope you understand.
Regards
Dilip
FHA or a USDA Loan both is good for who has low score.
Rural development has no down payment requirement or monthly mortgage insurance payments as opposed to FHA. USDA Loan is more better that FHA loan.
USDA is a better loan as it is 100% financing and no PMI, but it is generally easier to get a an FHA done, meaning FHA will take lower scores or worse credit,
Ihope you understand.
Regards
Dilip
i think you'll find that rates are higher with usda than with fha loans. depending on your particular circumstances, that may make a difference. it's worth to price each product out, weigh the differences and see which makes more sense for you.
