In a surprising announcement, the USDA Guaranteed Rural Development Home Loan Program announced starting October 1st, 2011, they will begin collecting (charging) monthly mortgage insurance of .3%, but their up front mortgage insurance will be reduced from 3.5% to 2%.
If you are unfamiliar with the no down payment 100% financing USDA Guaranteed home Loan, please give me a call.
Why is the USDA now charging monthly mortgage insurance? Due to some upcoming nationwide changes to make mortgage lenders more accountable to the loans they approve, USDA implemented this in order to prevent the American tax payer from subsidizing the last true 100% financing no down payment home mortgage program. It’s very rare for a government agency to not look to the tax payer to fund their program……hats off to the USDA for not wanting to suck the life blood out of the American tax payer.
How will this change reduce your buying power? On a $200,000 purchase using the USDA loan @ 5%, your current mortgage payment will increase $34/month ($1,145 payment) under this new split premium mortgage insurance structure. Make sure your Lender updates your pre-approval to be sure you still qualify if purchasing later in the year.
Is FHA now a better loan option? Nope. An FHA loan with a purchase of $200,000 requires a 3.5% down payment….that’s an extra $7,000 you would need to scratch up……unless we can get you approved for one of our FHA down payment assistance programs. Even with the 3.5% down payment, the monthly payment using an FHA loan would still be $86 more per month than using the USDA loan!
$86 over 30 years means an FHA loan would cost you $30,960 more to purchase your home! Do you want to pay more for your home?
Comments(3)