We are often asked by first time home buyers which loan is better? USDA Rural Housing, FHA or maybe Conventional Fannie Mae loans? Below we have listed some pros and cons to each program to help Florida homebuyers better decide.
USDA Rural Development Loans: Pros
- USDA 502 Guarantee loans is the only mortgage program in Florida (unless military) that still allow 100% financing with no down payment.
- Loan qualifying criteria and credit standards are very flexible.
- Monthly mortgage insurance (PMI) is three times less when compared to FHA loans. Big advantage to USDA
- Home seller is allowed to pay all buyers closing costs and escrows.
USDA Rural Development Loans: Cons
- The house you purchase must be located in a USDA approved eligible location.
- The income for the household must be below the USDA income limit per county.
- Home with swimming pools can be a challenge in regards to appraisal and value.
- Deferred student loan debt must be included in debt to income ratio calculations regardless of deferment.
FHA Mortgage Loan: Pros
- With FHA the property can be located anywhere in FL, no restriction on location. Downtown Tampa, Orlando, Jacksonville.. all ok.
- No household income limits with the FHA program.
- FHA is probably the easiest mortgage to get qualified for in regards to credit.
- In most cases FHA interest rates are the lowest available.
- Non occupying co-borrowers are permitted with FHA loans.
- Deferred student loan debt can be excluded from debt to income ratios under certain restrictions. This can allow borrowers to potentially qualify for a higher purchase price.
- Home seller can pay all buyers closing costs and escrows, up to 6%.
FHA Mortgage Loan: Cons
- Homebuyers must be down a minimum of 3.5% for a down payment – this program is not 100% financing. However, the down payment of 3.5% can come as gift from family, etc.
- The monthly mortgage insurance costs is much higher when compared to USDA loans.
- Like USDA loans, the FHA monthly mortgage insurance costs is paid for the life of the loan in most cases, read here for FHA details.
As for conventional loans, these loans generally require a min of 10% down payment to be possible. However the mortgage insurance is not required if borrowers put down 20% or more.
Do you have question? Give us a ring at 904-302-6060 or just submit the quick info request on the right side →
Florida & Georgia home buyers interested in the FHA loan can visit www.fhamortgagesource.com for more details.
USDA loans pros and cons