Which Is The Better Loan, The USDA Loan or The FHA Loan?
Well I do quite a bit of both and for the majority of people the USDA loan will be a much better financial move for buyers in Arizona, and here’s why.
FHA has a down payment requirement, and it is currently at 3.5% of the purchase price. The USDA Loan does not require any sort of down payment at all. So right there, you get to keep that 3.5% down payment in your bank account; that is if you even have it in the first place, right?
FHA also requires a monthly mortgage insurance payment. That amount that FHA requires is 0.9 percent of the loan amount. That will give you the annual payment, so just divide it by 12 for the monthly amount.
So if you have a $200,000 loan amount then the monthly FHA Mortgage Insurance would be just over $150.
FHA will determine the loan amount based off of the lower of the sales price or the appraised value. And the USDA Loan will let you base the loan amount off of 103.5 percent of the appraised value. They do this because they really don’t want to see a borrower come to closing with cash, so you can usually roll all your closing costs into the loan.
And still have a lower payment than the FHA loan.
So, if you qualify for a USDA Loan AND the property is in a USDA eligible area, then the USDA Loan will always be the most cost effective loan available.
One last thing in the old FHA versus USDA question… The USDA Loan has much simpler, easier underwriting than FHA; which makes it easier to qualify for.
I hope you found this Arizona Home Loan tip useful and would love to hear your comments.
To find out if you qualify for a USDA Loan call (520) 225-0380 or click on the Get Started on USDA tab over at USDARuralHomeLoans.com and ask for a quote. If you want to go ahead and get your application in, you can fill out my Arizona Home Loan Application Online here.