Sep 042014
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The USDA RD loan is a great option for homebuyers in more rural locations. The loan requires no down payment and has much lower monthly mortgage insurance than an FHA loan.

Unfortunately, the gap between the two will close a little this year. For all loan commitments after 9/30, the USDA is increasing its monthly MI rate from 0.4% to 0.5%.

That still makes it a bargain compared to FHA. While USDA does have a higher up-front fee, 2% vs. 1.75% for FHA, look at the difference in monthly payment between the two. For a $150k FHA loan, the monthly payment including mortgage insurance would be about $863. For a USDA loan, the payment would be about $757, more than $100 less.

If you’re thinking about using a USDA loan, be aware that USDA bases the fee increase on the date it commits to the loan, not the date you apply. You probably should make your loan application no later than next week if you want to beat the deadline.

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