No doubt about it… the market for first time homebuyers has heated up. With interest rates hitting a 3 month low this week and the $8,000 tax credit set to expire at the end of November, this may be the perfect time to get off the fence and into a home. Two of the hottest loan programs on the market are USDA Rural Housing and, of course, FHA. I thought it might be worth a quick look to see how these TITANS of the first time buyer world differ from one another.
The USDA Rural Housing loan allows you to obtain 100% financing but you must purchase a home in the designated rural areas (you can find a map of the areas here) USDA also has household income limits. One of the things that many buyers find attractive about this loan program is that it does not require monthly mortgage insurance. Mortgage insurance is a monthly fee a borrower must pay to protect the lender from losses in the event that the borrower defaults on the mortgage. When comparing the two programs, often times USDA will have the lower of the two mortgage payments and ultimately is the preferred choice of many of today’s buyers.
FHA has been a popular program for many years. With its flexible underwriting criteria, 3.5% down payment requirement and attractive interest rates, it has been a first time buyer favorite for as long as I can remember. One thing to consider when analyzing USDA vs. FHA, is that FHA does have a monthly mortgage insurance premium, which may be around $70 – $120 for a typical buyer in the Portland Oregon area (higher loan = higher insurance). The other factor that makes FHA attractive, is that FHA does not have geographical restrictions like USDA Rural Housing. So if you want to buy a home in Portland, Beaverton, Sherwood, Hillsboro or beyond… it is all just the same.
If you have questions about purchasing or refinancing using the USDA or FHA loans, feel free to contact me anytime:
Dustin Hughes
Northwest Mortgage Advisors
503-997-4944
dustin@northwestmortgageadvisors.com
