USDA Loans vs. FHA Loans : Winner is USDA

Mortgage and Lending with Ruoff Home Mortgage 234777

The USDA Rural Development Guaranteed Housing Loan Program is the most under utilized mortgage loan product out there in my opinion. While the name may indicate "farm or farmland" to a lot of people. It is primarily  intended for single family one unit homes located in smaller communities. Generally ones with less than 10,000 population, but in some cases up to 25,000. All of my Kosciusko county in Indiana is eligible. There are also income limits, but are very generous. Kosciusko county for example has limits of $73,600 for a family of 1-4, and $97,150 for 5-8 persons.You can check your area & income limits here:


USDA loan


The Highlights of this program are:

  • True 100% financing - no down payment required
  • No minimum cash contribution from borrower
  • No monthly mortgage Insurance (PMI or MI)
  • No Cash reserves
  • No maximum loan amount; Just income and repayment ability
  • Eligible repairs/ Rehab (up to $5000) can be added to loan amount and completed after closing.
  • No First time buyer requirement
  • No Recapture costs
  • Conventional type loan packaging with only a 2% (can be financed) Guarantee Fee.
  • Credits score minimum of 620
  • Can also be combined with a Mortgage Credit Certificate program
  • Competitive Interest rates ( typically within 1/8% of FHA)

      Below illustrates how a typical USDA loan would compare to a FHA loan:

                                                      USDA                                                FHA

Loan amt.                                      $150,000                                             $150,000

Down pymt.                                      $0                                         3 1/2%    $5250

Required loan program fee          2%   $3000                                  1.75%   $2625

Amt. to Finance                             $153,000                                            $147,375

 Term/ rate                                    30yr./ 4.875%                                 30yr./ 4.75%

 P & I                                                $806                                                        $766

Mtg. Ins.                                            $0                                                          $67

Total pymt.                                       $806                                                      $833


 If the USDA loan program is not available to you because of location or income limits, the FHA loan is still an excellent program. But if both are available to you, I would choose the USDA.

As you can see the monthly payment on the USDA loan is actually lower with no monies out of pocket. If you are in a geographical location that USDA is available and you qualify income wise, I highly recommend as a consumer to take advantage of this wonderful program. I also recommend that Realtors make your clients aware of this great product. They can keep their 3 1/2% to get started in their new home.





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Greg Miller   
Mortgage Loan Originator 
NMLS # 234777



Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Joseph J. Chang 03/11/2010 05:58 AM
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David Monsour
Keller Williams Keystone Realty - Gettysburg, PA

These loans are awesome.  I've had about half my people (that were eligible) go with a USDA over FHA.  As long as you qualify you can't lose.  Good info here.  My entire county can go rural so it's a great loan around these parts.

Mar 11, 2010 05:27 AM #1
Joe Hansen
Joe Mortgage - Precision Mortgage Inc. - Phoenix, AZ
Joe Mortgage Team

The only problem that I have had with USDA is the length of time in closing.  Some banks are a little slower in this area but overall I agree, USDA is a great loan.

Mar 11, 2010 06:14 AM #2
Greg Miller
Ruoff Home Mortgage - Sarasota, FL
Florida Home Loans - Conventional,FHA,USDA,VA

David- We are fortunate also that we are eligible county wide. I agree that sometimes the only stumbling block is the income ceiling, but I still feel its very generous for the average incomes in our area.

Joe - We are able to Underwrite in house so our length of time is pretty quick, at least comparable to FHA processing time.

Mar 11, 2010 07:01 AM #3
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Greg Miller

Florida Home Loans - Conventional,FHA,USDA,VA
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