FHA loans v. USDA loans
The following is a GUEST post by submitted by Brandon Laughlin of www.mortgageloanplace.com. (We here at Icicle Creek Real Estate will add our thoughts separately in the comments section.)
The federal government offers Americans an array of programs to help achieve the dream of homeownership.
Federal Housing Administration loans remain among the most popular and widely accessible options. The FHA has helped insure more than 34 million properties since its inception in 1934. But the low-cost loan program that benefits thousands of low- and middle-income Americans isn’t the government’s only significant home loan program. It’s also not the only low- to no-cost option.
The U.S. Department of Agriculture also provides home loans for the millions of Americans who qualify.
Each loan program has unique benefits and opportunities for eligible home buyers. Here’s a snapshot of both FHA and USDA loans. Prospective home buyers may want to check with a loan expert to help determine if one of these programs best suits their unique needs.
USDA loans are primarily for people living in rural parts of the country. But those in smaller communities and villages may also qualify, depending on how an area is designated “rural.”
Borrowers are not required to provide a down payment or pay for closing costs on a home with USDA loans. They also don’t have to pay for mortgage insurance. Borrowers can buy existing homes or new structures of any size or shape, as long as it’s considered “modest” for the community and has a market value within the local loan limit.
The program has strict eligibility requirements, including credit history and residence. Borrowers have to buy a home in a qualified rural area, although there are some circumstances where people can obtain USDA loans for homes in cities of up to 25,000 people.
USDA loans can provide borrowers with competitive fixed-rate loans. There is no ceiling on purchase price, and borrowers can also use the money to cover repairs.
Local USDA offices can help prospective buyers find a home in their area. They also have lists of approved lenders. In Chelan County, the current loan limit is $255,100.
Like the USDA, the FHA does not actually issue loans. It insures them, which provides lenders with a greater degree of protection. In turn, that protection helps many borrowers secure better rates.
FHA mortgages are favored by many first-time buyers. They come with little or sometimes no initial costs and are typically easier to obtain than many conventional loans. FHA loans require only a 3.5 percent down payment, although in some cases that can be reduced to zero. That down payment can come from a host of sources, from charitable groups to employers.
Borrower don’t pay mortgage insurance on FHA loans. Instead, they pay mortgage insurance premiums, which are typically split between an upfront payment and one that can be rolled into the monthly mortgage payment.
Buyers can utilize FHA programs that provide funding for home purchase and rehabilitation costs for single-family homes. Fixed rate and adjustable rate mortgages are available to qualified borrowers. Prospective homeowners can also use FHA loans to buy up to four unit buildings (as long as one is owner-occupied) and condominiums.
Geography dictates most FHA loan limits, which range from $271,050 to a maximum of $729,750 in high-cost areas. In Chelan County, the FHA loan limit for a single-family home is $342,700. For a three-family unit, the loan limit rises to $659,050.