USDA Loans

Q: Differences between Rural Development and FHA Loans?

A: What is an FHA loan?

An FHA loan is a loan that is made by a bank but insured by the Federal Housing Administration (FHA). The FHA guarantees the bank who lends the money in case of loan default.

FHA loans require 3.5% down payment and will allow for the seller to pay some closing costs thru a process called ‘seller concessions.’ FHA loans have a mortgage insurance premium of 1% of the loan balance financed into the loan. Additionally, FHA loans carry a monthly mortgage insurance premium of .90% (in other words, you pay an additional $75. a month for ever $100,000 financed).

FHA loans have lending limits based on the county you live in, and generally require a 620 or greater credit score.

A: What is a Rural Development Loan?

Like a FHA loan a Rural Development Loan (also called USDA Loan) is also insured by the US Government.  Rural development loans offer 100% and will allow all closing costs to be paid by the seller, or can be rolled into your loan. Rural Development loans are truly NO MONEY DOWN Loans!

Rural Development Loans have a one-time ‘funding fee’ of 3.5% that is financed into the loan amount.  In addition to the 100% financing, Rural Development Loans have no monthly mortgage insurance.

Credit guidelines for Rural Development Loans are considered more relaxed that FHA Loans, and you can obtain financing for a Rural Development loan with a credit score down to 600.

Rural Development Loans                                   FHA Loans

√                                           No Money Down
√                              No Monthly Mortgage Insurance
√                              All Closing Costs Included in Loan
√                               Relaxed Underwriting Guidelines

 



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