New England Properties

Frequently Asked Question: Are USDA Loans Good?

Frequently Asked Question: Are USDA Loans Good?

Q: Has anyone used a USDA Loan? Are USDA loans good? How do they work, and where can one use it on Cape Cod?

A: Yes, the USDA guaranteed home loan is a great mortgage program. USDA rural housing loan programs allow qualified homebuyers to get loans with minimal closing costs and no downpayment.

The purpose of the USDA loan program is to enable eligible low- and moderate-income borrowers (who earn up to 115 percent of the Area Median Family Income) to purchase modestly priced housing for their own use as a primary residence. The program is available for both the purchase and repair of existing as well as newly constructed dwellings.

Much like VA loans, USDA loans have a "funding fee" which is 2% of the loan amount. The funding fee can be rolled into the mortgage. As a comparison, FHA loans have a upfront mortgage insurance premium of 1.75% of the loan amount. However, while FHA loans also have a monthly insurance premium, USDA loans do not. With USDA, you could buy a home with no money down, and have lower monthly mortgage payments than with a FHA loan with a 3.5% down payment. See this sample loan comparison flyer to see the difference between a conventional mortgage, an FHA mortgage, and a USDA loan.

All homes on Cape Cod (Barnstable County) and the Islands (Martha's Vineyard and Nantucket) are eligible for the USDA loan program.

In Massachusetts, most homes in Plymouth, Bristol, Worcester, Franklin, Hampden, Hampshire, and Berskhire counties qualify for the USDA loan program. The southwest portion of Norfolk county, the northwest portion of Middlesex county, and the northeast portion of Essex county qualify as well. Homes in Suffolk County, in cities, and in large metropolitan areas do not qualify for the USDA home loan program.

 

Lew Corcoran
Licensed Real Estate Professional

Best Choice Real Estate Services
133 Turnpike St, South Easton, MA 02375
Phone Toll-Free: (800) 984-3341

Serving Easton MA and the Surrounding Area

 

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Homes for Sale | Homes for Rent

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3 commentsLew Corcoran • February 18 2010 07:39AM

Frequently Asked Question: How Much Can I Borrow With A USDA Rural Development Home Loan?

Frequently Asked Question: How Much Can I Borrow With A USDA Rural Development Home Loan?

Q: How much can I borrow with a USDA Rural Development Home Loan here on Cape Cod?

A: With a USDA Rural Development Home Loan, you can buy a home with no money down. There is not a set maximum loan size; however, the amount you can borrow for a USDA Rural Development Home Loan depends on your monthly income and debt payments as well as the appraised value of the home you are buying.

To qualify for a USDA Rural Development Home Loan, your total household income can not exceed 115 percent of the Area Median Family Income. In addition, the address of the property must also qualify.

Your monthly USDA Rural Development Home Loan mortgage payment (which includes principal and interest as well as escrows for taxes and insurance) can not exceed 29% of your gross monthly income. Your total monthly debt obligations including the mortgage payment can not exceed 41% of your monthly income. The total debt ratio can go higher if there are compensating factors such as high credit scores or a large cash reserve. However, the maximum debt ratio can not exceed 45% of your monthly income.

These ratios are used to determine the maximum USDA Rural Development Home Loan amount that you can qualify for. For a given mortgage amount, the monthly mortgage payment on a USDA Rural Development Home Loan with no money down is less than an FHA mortgage with 3.5% down because unlike FHA mortgage, there is no monthly mortgage insurance premiums.

See a comparison between a conventional mortgage, an FHA mortgage and a USDA mortgage here.

To find out how much you qualify for, click on my free purchase assistant.

 

 

Lew Corcoran
Licensed Real Estate Professional

Best Choice Real Estate Services
133 Turnpike St, South Easton, MA 02375
Phone Toll-Free: (800) 984-3341

Serving Easton MA and the Surrounding Area

 

Search the MLS for:

Homes for Sale | Homes for Rent

Short Sales (Pre-Foreclosures)

Government and Bank Foreclosed Homes for Sale

Learn how to Avoid Foreclosure with Home Rescue Plans

Get the latest Easton MA Real Estate Market News

0 commentsLew Corcoran • January 25 2010 06:08AM