Question: First, thanks for posting all this informative information. What is the big difference between a FHA and USDA mortgages ? I have already been pre approved for a FHA loan with my bank. However, I was talking to a co-worker and she mentioned the USDA home loan she just received. Never heard of it…trying to decide what option is best for me.
J. Ramos – Orlando, FL
Thank you and great question. Key differences listed below –
- FHA- Property can be located anywhere, no income restrictions like with USDA / Rural Development. However, FHA requires a minimum of 3.5% down payment. This does not include any closing costs that can range from 3-6 % of your purchase price. FHA will only lend to you the lesser of the appraised value or sale price of the home. You cannot “roll in” closing costs into your loan if the home appraises for higher than the sale price. Finally, FHA does have a monthly mortgage insurance costs (or PMI) that is added to your monthly payment.
- USDA / Rural Development home loan – Does have income limit’s and restrictions on where the property is located. However, USDA is true 100% financing, no down payment required. USDA also has lower monthly mortgage insurance costs. You can also roll in your closing costs in your loan if the home appraises for higher than the sale price. You cannot do this with FHA as stated above. USDA is the only option left (for civilians) in Florida for 100% financing. The only other mortgage option that offers 100% financing is a VA home loan. You must be past or active military to get a VA loan.
So what option is best for you? Well, it depends, do you need to live in downtown Orlando? If so, the FHA home loan would probably be your best option since this is not a Florida USDA eligible area. However, if you are looking to live in some of the USDA eligible areas around Orlando ( Apopka , Clermont , Ocoee , Kissimmee , Bithlo , St. Cloud , etc,) then the USDA home loan option is defiantly worth a closer look. There are many USDA eligible areas throughout Orange, Seminole, Osceola and Lake county.
USDA Mortgage Source is Florida’s leading resource for all 100% USDA / RD home loans. Escambia, Baker, Pasco, Collier county and everywhere in between – please visit our main web site at www.UsdaMortgageSource.com or call 800-743-7556 to learn more about the benefits of 100% USDA home loans here in Florida. We are available to serve you seven days a week. 2020