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Are USDA or FHA loans better?

August 9th, 2019 by Sean Stephens

What are the differences between a USDA and FHA loan?

Do you know the difference between a USDA and FHA loan? While they both have similar characteristics, there are important aspects of each program which can impact a buyer’s out-of-pocket costs and monthly payments.What are the differences between a USDA and FHA loan in Florida?

In today’s video tip we will line up the two side by side, and let you be the judge on who comes out ahead!

Remember, if you need help or a have question that is what we are here for, so just call or email to discuss your scenario because we are known for returning calls, replying to emails, and responding to your messages. Now, wouldn’t it be nice if everyone did that!

Are USDA or FHA loans better?

As a starting point, although FHA and USDA loans are both thought of as first-time homebuyer programs, they are also eligible for previous homeowners. Provided it is a primary residence, this can be a great option for a buyer looking to sell and move up to another property.

are-usda-or-fha-loans-betterRemember though, both FHA and USDA loans only allow for primary residences, so no investment properties or second homes.

Let’s take a look at the following example in order to dig deeper and determine if USDA or FHA loans are better. For today’s example, we will base our figures off a $100,000 loan amount.

$100,000 Loan / 30 year term

FHA Loan

  • 3.5% required down payment
  • 85% Monthly MIP (Mortgage Insurance Premium
  • Equals a $70.83 monthly MIP payment
  • One time up-front financed mortgage insurance is currently 1.75%, or $1,750 in this example.
  • NOT able to finance closing costs

USDA Loan

  • USDA loans allow for NO DOWN PAYMENT (100% Financing)
  • .35% monthly premium
  • Equals a $29.17 monthly payment
  • One time financed Guarantee Fee is currently 1%, or $1,000 in this example.
  • You can finance closing costs with a USDA loan

are-usda-or-fha-loans-better

Remember, USDA Loans allow for the ability to finance closing costs when the appraised value is higher than the contract sales price, while FHA loans do not.

Understanding the differences between FHA and USDA loans is important, because since many banks and lenders do not specialize in the USDA program, we commonly see homebuyers only offered FHA or Conventional loans.

Just call or email if you have any qualifying questions, want to discuss a new scenario, or would just like to take advantage of our free 2nd opinion service which is great for those existing transactions.

800-806-9836 Ext. 280
SeanS@MPLX.org

I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!

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