USDA mortgage loans allow for purchase and no cash out refinances of primary residences. Some benefits of USDA are:
No monthly mortgage insurance
No asset or automatic reserve requirements
Gifts allowed for closing costs
Required property improvements can be financed into the loan up to 102% of the "improved" value. (USDA will allow repairs to be completed after closing!)
Eligible USDA property types include single family homes, condominiums and manufactured housing*. USDA does have some income and property eligibility requirements.
Even though a mortgage insurance premium is not required, USDA charges a 2% funding fee to guarantee the mortgage. This fee may be financed into the loan amount.
VA home loans are guaranteed by the U.S. Department of Veteran Affairs (VA) to eligible veterans for the purchase, rate & term refinance or cash out refinance of a primary residence.
Benefits of VA loans include:
Common sense underwriting guidelines (with respect to credit, debt to income ratios, etc.)
Little or no down payment
Competitive mortgage rates
No monthly mortgage insurance premium
VA Home Loan Guaranty Services also provides counseling and assistance to veteran borrowers having financial difficulties or facing default.
Even though a mortgage insurance premium is not required, borrowers are charged a small funding fee for VA mortgages, which guarantees the loan. The fee may be paid in cash by the buyer or seller, or it may be financed and included in the loan amount.
A VA mortgage can be used to buy a home, build or even improve a home with energy-saving features such as solar or heating & cooling systems, water heaters, insulation, weather- stripping & caulking, storm windows & doors or other energy efficient improvements approved by VA.
A satisfactory Certificate of Eligibility from VA must be presented to be eligible for the loan program.
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USDA is similar to FHA in that officially no FICO score is required to be used to qualify for the program; however, many lenders still insist on using your credit score for qualifying. The guarantee is issued by the government to the lender, but the lender still makes the rules.
Best depends on what your needs are.
- where you want to buy
- if you're eligible for VA or not
- what your credit scores are
- how small a down payment you must have
If you drop me a line with these, I can comment on which program looks better for you.
The USDA loan has requirements of income amount and VA does not. USDA is only offered in certain areas and VA is not. VA has a 2 to 3% funding fee where USDA does not. Those are the major differences. I have some great mortgage vendors that handle both of these type of loans and they can go into more detail with you if you would like more information. Just email me at email@example.com and I will be happy to supply you with their names. Thank you for allowing the realtor community to be of help.
Best bet is to go over your lender to compare like for like.
If you need a lender I recommend Ashleigh.
Here is a link to her info.
Good luck with your home purchase.