Does a USDA Loan have PMI?
Today’s video will answer the question if USDA loans have PMI and keep you in the know about terminology and key differences between USDA, FHA, and Conventional loans.
If you have not yet done so, please download our USDA blueprint for success with the link below. This free guide is a great resource to walk you through step by step through the USDA qualifying process.
Do USDA Loans have PMI?
As a starting point and to clarify, PMI (private mortgage insurance) exists on conventional loans in cases of less than 20% down payment and it has a variety of different ways of how it can be paid.
Also, under the Homeowner’s Protection Act, PMI can be terminated either by request or automatically when your balance is paid down to or below 80% of the original home value.
Now, MIP (mortgage insurance premium) is found on FHA loans and is paid monthly.
Also, remember that when you have less than 10% down payment on an FHA loan, you will be required to pay the mortgage insurance for the life of the loan.
With down payments of 10% or greater, FHA mortgage insurance will be removed after 11 years.
However, in the case of USDA Loans, they do not technically have mortgage insurance, but instead, have an annual fee and even though it is for the life of the loan, it happens to be over two times lower than that of FHA’s monthly mortgage insurance!
Here is an example to help show you the difference in monthly costs between FHA and USDA:
FHA: .85% X $100,000 = $850 / 12 = $70.83 per month
USDA: .35% X $100,000 = $350 / 12 = $29.17 per month
Yes, it is true, even though USDA loans allow for NO Down payment their borrowing costs are better when compared to FHA which requires a minimum down payment.
And don’t forget that your closing costs can be financed with a USDA loan when the appraised value is higher than your purchase price, which is a benefit that FHA will not allow.
Whether it be FHA, VA, USDA, or Conventional – Just call or email to discuss your scenario and let us show you the “Metroplex” difference.
800-806-9836 Ext. 280
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.
I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!
P.S. – You can download our “USDA Blueprint for Success” by CLICKING HERE.