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First time home buyer want to know USDA versus FHA

To start, I know USDA has the zero down option and FHA does not. Beyond that, I'd like to know the better option. I have only $5,700 saved for mortgage fees but I am looking at low price properties in the $150,000 realm. 728 credit. My monthly income left over for a mortgage payment every month is no more than $1100. Possible with FHA versus USDA, or both? by lindrussel.22001506 from Hooven, Ohio. Jan 8th 2015 Reply


Dave Metsker (DaveMetsker)
#37 ranked lender in Oregon - 2,317 contributions

USDA is limited to "rural" areas, and has an upper limit on family income, based on family size.

Jan 8th 2015
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Linda Wintersteen (Linda123)
#63 ranked lender in Arizona - 1,256 contributions

IN ORDER to answer you best , and to make sure that you can qualify, I need to know how much monthly you pay out , car payments, credit cards, student loans, and then we can look at the monthly paymentUSDA , the property has to qualify, its for rural areas, or where they, the govt are trying to get people to move to areas.. there is no mortgage insurance with USDA, AND FHA HAS A MORTGAGE INSURANCE MONTHLY

Jan 8th 2015
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Michelle Curtis Loan Originator NMLS 401173 (EmbassyFundingLLC)
#77 ranked lender in Florida - 2,240 contributions

Firstly , you can only utilize USDA loans if the property is in a USDA area and your income fits USDA eligibility as well. If it is then you would want to use the USDA loan over FHA. Also there are 97% financing options available now as well on the conventional side that have very low monthly MI if you qualify. There are too many options to discuss here but get with a local mortgage broker and ask him or her to go over all the options for you, USDA, FHA, and conventional loans.

Jan 8th 2015
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William J Acres (William_Acres)
#1 ranked lender in Arizona - 8,650 contributions

there's not enough info to answer your question properly.. Lenders look at your debt to income to determine what you can afford.. and they look at GROSS income, not take home pay.. so unless we know what you gross and what your monthly expenses are, it's hard to say if you can afford a $150K home.. But this I know.. 728 is within the acceptable range for both lending programs and it's very likely that between the lender, the seller and your agent, that you can get help paying your closing costs.. so $5700 should be enough for either program. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com

Jan 8th 2015
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T.C. Strait (TCstrait)
#71 ranked lender in Ohio - 18 contributions

Linda, generally speaking, if you have the option to go FHA or USDA, USDA is the better option. There are quite a few things that go in to determining what is best for you. I'm in West Chester, OH so somewhat local to you. I'd be happy to discuss the options that you have available. Give me a call at 513-777-8383 x222 when you have a few minutes to talk.

Jan 8th 2015
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Barb Lanis (BarbLanis)
#70 ranked lender in Illinois - 663 contributions

Besides the other valuable information posted here, you can also consider a Fannie/ Freddie 3% down option if you are a 1st time buyer. FHA has higher monthly MIP and USDA requires the property to be in designated areas. The Fannie/Freddie option has a lower monthly PMI cost. It would also be best to negotiate a closing cost credit from the seller, which would further reduce your out of pocket expenses. You need to let your real estate agent know this up front.

Jan 8th 2015
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Sean Young (SeanYoung)
#2 ranked lender in Colorado - 1,112 contributions

The major difference is that with a USDA loan the property has to be in an eligible area and your income needs to be below the income limits for that county. Let's say you did meet both criteria and qualified for both loans the other major difference will be the reduced mortgage insurance that USDA has over FHA. USDA will have a 2% guarantee that is added to the loan balance and FHA will charge 1.75% up front mortgage insurance. On top of that will be the monthly mortgage insurance, USDA has a 0.50% monthly mortgage insurance fee and FHA has 1.35% with the minimum down payment.

Jan 8th 2015
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