FHA Loans About To Get More Expensive - One More Reason To Use A USDA Loan

By
Mortgage and Lending with Millennial Home Loans, LLC NMLS #133925

FHA Loans About To Get More Expensive - One More Reason To Use A USDA Loan

Starting April 18, 2011 the factorial used to determine annual mortgage insurance premiums for a FHA loan will increase .25%.  Based on today's annual mortgage insurance premium rate of .9%, assuming a 3.5% down payment on a 30 year mortgage, the .25% increase will result in a new rate of 1.15%.  

Assuming a $200,000 loan amount the increase in mortgage insurance rates will cost the borrower an additional $41.66 per month.  To determine the impact on a FHA borrowers monthly payment start by taking the monthly mortgage insurance premium factorial at .000958 (1.15%/12) and multiplying against the outstanding principal balance.    Compare this using the old factorial of .00075 (.9%/12).  This mortgage insurance change is calculated as follows:

  • Current Premium:  .009/12 * $200,000 = $150.00
  • New FHA Premium:  .0115/12 * $200,000 = $191.66

This increase in monthly mortgage insurance premiums should be one more reason why home buyers considering purchasing in a rural community should usa a USDA Loan since there is no monthly mortgage insurance premium on the USDA Loan Program.  This means that the monthly payment on the USDA Loan is actually less than a comparable fixed rate FHA Loan even though the USDA Loan:

  • Typically has a .25% higher interest rate than a FHA Loan
  • Is a larger financed loan due to not requiring a down payment.  A home purchased with a USDA Loan is financed at 100% Vs. 96.50% of the purchase price for FHA, which has a 3.5% down payment
  • Has a higher upfront "Commitment Fee" of 3.5% of the purchase price Vs. FHA's 1% "Upfront Mortgage Insurance Premium".  Both of these fees are financed into the loan further increasing the amount financed of a USDA loan Vs. a FHA loan

Despite all of these factors the monthly payment on a USDA Loan has always been less than a comparable fixed rate FHA Loan and starting April 18 the benefits of using USDA financing will get even greater. 

To learn more about your USDA Loan Financing options using the USDA Rural Loan Program go to USDARuralLoan.com or email info@USDARuralLoan.com.  I specialize in USDA Loans and Renovation Loan Financing.  I am approved to lend nationwide and can be reached at (866) 747-2882.

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Topic:
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Groups:
Mortgages
Realtors Needing the services of the Lending Powers
Mortgage Bankers
Maryland Real Estate and Mortgage Group
USDA Rural Development Loan Group
Tags:
usda
fha mortgage insurance
commitment fee
usda loans
usda vs fha
fha vs usda

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Rainmaker
3,304,013
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

 One of the things that USDA folks could do to make this loan more popular is have an easy place to go to find out what areas can use this loan...it would be utilized more often if you knew where you could use it.

Feb 17, 2011 09:40 PM #1
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

And for every dime the purchaser saves in MIP, they lose 5 in the increased cost of gasoline to get to work from their rural home to their urban employment.

Feb 17, 2011 10:24 PM #2
Rainer
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David Zuckerman
Millennial Home Loans, LLC - Sykesville, MD
Mortgage Broker - Low-to-no downpayment mortgages
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

David.. it all sounds good, but USDA loans are for specific areas. This would be a no brainer if USDA loans could be used every where. I am guess I am one that would include this in my post, instead of getting people to call in for USDA loans, when it's not for everyone.

You made this statement..

"Despite all of these factors the monthly payment on a USDA Loan has always been less than a comparable fixed rate FHA Loan and starting April 18 the benefits of using USDA financing will get even greater."

In my opinion, a USDA loan is a no brainer to use even before the FHA mortgage insurance takes place on April 18th.  I guess my point is that you don't talk about geography or where USDA is allowed, but talk about all the negatives of a FHA loan. Just food for thought.

Feb 21, 2011 03:29 AM #4
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Rainer
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David Zuckerman

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