Fannie Mae Is Making Our USDA Loan Program Much Cheaper

I’ve been helping people for years to get the cheapest, easiest loan possible to buy a home in Arizona with the USDA Loan Program.  Now, in a recent article in USA Today it is reported that Fannie Mae and Freddie Mac are raising their loan costs to home buyers.  This will make the USDA Loan Program even cheaper than it is now.  Fannie and Freddie fund home loans that are known as Conventional loans and have been the largest supply of home loans forever.

While the USDA Loan Program has limits on the fees that can be charged, Fannie and Freddie are introducing new fees to be charged to consumers based on your credit score and how much you are putting down.

If you plan to put more than 25% down and have a credit score higher than 720, you won’t notice a difference in the new Fannie and Freddie price hikes.  Everyone else will see a substantial price increase, only if you apply for conventional financing.

The Fannie Mae & Freddie Mac price increases go into effect on April 1, 2011.

Apply for a USDA Loan Online Now: Loan Application

Just to give you an idea, for someone buying a $150,000 home with 5% down and a 620 middle credit score, Fannie Mae will charge that borrower an extra $4,631 at closing once April 1st hits.

With the USDA Loan Program, not only do you keep that 5% down payment in your bank account but you get to keep the extra fee the Fannie Mae would charge you.

Proof once again that the USDA Loan Program is the cheapest loan available to buy a home in Arizona.

We are seeing the use of the USDA Loan Program increase in popularity all over Arizona, especially in Sahuarita, Anthem, Buckeye, Maricopa and Queen Creek.

I hope you found this Arizona Home Loan tip useful and please, leave a comment below.

To find out if you qualify for a USDA Loan call (520) 225-0380 or click on the Get Started on USDA tab above and ask a question if you like.  If you are ready to go ahead and get your application in, you can print out my Arizona USDA Loan Application here.

Which Is The Better Loan, The USDA Loan or The FHA Loan?

Well I do quite a bit of both and for the majority of people the USDA loan will be a much better financial move for buyers in Arizona, and here’s why.

FHA has a down payment requirement, and it is currently at 3.5% of the purchase price.  The USDA Loan does not require any sort of down payment at all.  So right there, you get to keep that 3.5% down payment in your bank account; that is if you even have it in the first place, right?

FHA also requires a monthly mortgage insurance payment.  That amount that FHA requires is 0.9 percent of the loan amount.  That will give you the annual payment, so just divide it by 12 for the monthly amount.

So if you have a $200,000 loan amount then the monthly FHA Mortgage Insurance would be just over $150.

FHA will determine the loan amount based off of the lower of the sales price or the appraised value.  And the USDA Loan will let you base the loan amount off of 103.5 percent of the appraised value.  They do this because they really don’t want to see a borrower come to closing with cash, so you can usually roll all your closing costs into the loan.

And still have a lower payment than the FHA loan.

Apply for a USDA Loan Online Now: Loan Application

So, if you qualify for a USDA Loan AND the property is in a USDA eligible area, then the USDA Loan will always be the most cost effective loan available.

One last thing in the old FHA versus USDA question… The USDA Loan has much simpler, easier underwriting than FHA; which makes it easier to qualify for.

I hope you found this Arizona Home Loan tip useful and would love to hear your comments.

To find out if you qualify for a USDA Loan call (520) 225-0380 or click on the Get Started on USDA tab above and ask for a quote.  If you want to go ahead and get your application in, you can fill out my Arizona Home Loan Application Online here.

The USDA Loan – One True 0% Down Loan

I’ve been working hard for years now trying to get the word out about the USDA Loan.  It’s the Real Estate loan with the best possible terms that not too many people know about.

I’m trying to be loud..

I’m trying to be heard..

The USDA Loan has been around for years, but it is still relatively unknown.  Even after the great housing collapse we’ve witnessed over the last couple of years, and with FHA, and Freddie Mac and Fannie Mae tightening guidelines so far that the only one who seems to be able to qualify would be Donald Trump; the USDA Home Loan is offering terms that are down right insane.  Given the challenges we have been faced with here in Arizona in the housing market, this is probably the best loan to help spur home buying in our area.

So again, I’m trying to be loud and get the word out about the fantastic USDA Loan.

Many people hear the term USDA Loan and immediately think you need to buy a farm or some place a hundred miles out of town and in the sticks.  But the biggest surprise to most folks is that most subdivisions in the suburbs of the major Arizona cities are eligible for the USDA Loan.

Let’s talk quickly about the 4, I mean 6 most amazing advantages of the USDA Loan.

1. The USDA Loan is really the ONLY No Money Down Loan you can get
2. It saves money EVERY month because there is no expensive monthly mortgage insurance payment
3. The USDA Loan does NOT have a maximum loan limit like FHA
4. You don’t need to have much cash in the bank to qualify
5. The USDA Loan usually allows you to get your Earnest Money Deposit back at closing
6. It’s EASIER than FHA, VA or Conventional Financing

I know, I was only going to give 4 Amazing Advantages of the USDA Loan, but this loan is so valuable to the market right now that I could list advantage after advantage for hours..

Apply for a USDA Loan Online Now: Loan Application

Some USDA Loan Basics

• Always a 30 fixed, no goofy ARMS or interest only loans
• You can buy just about any home in a USDA Loan qualifying area.  Some lenders do not like manufactured homes.
• A credit score of ONLY 620 is needed.  If you are close it is easy to get there, ask us how.
• The USDA Loan income limits vary by geographic area
• The USDA Loan income limits also grow with more than 4 people living in the home

As an added bonus the USDA Loan will allow the seller to contribute as much toward closing costs, and even a down payment, as you can convince them to.  And in today’s market of short sales and motivated sellers, it is not unusual to see a seller contibute 4-7% for closing costs and or down payment.

The USDA Loan program is targeted toward low to moderate income families.  However if you take a look at the USDA Loan Income Limits you’ll notice that they are pretty big and the larger the family living in the house, the larger the qualifying income.

To find out if you qualify or how much you can save each month with a new USDA Loan, click on the Get Started on USDA tab above and ask for a quote.  If you want to go ahead and get your application in, you can fill out my Home Loan Application Online here.

A 5 Round Match To See If The USDA Home Loan Really Is Cheaper Than FHA?

Over the last several years I’ve been asked close to a bazillion times if the USDA Home Loan is the cheapest most financially efficient loan for someone with little or no down payment.  In those conversations I would typically explain the differences between your basic USDA Home Loan and the FHA Home Loan and let you determine which loan type is the cheapest and works best for you.  So, let’s illustrate it here on the blog.

Let’s go through some real number here based on a $250,000 home price..

Round 1; A look at down payments..

FHA Home Loans require a 3.5% down payment, which would be $8,750.  Not too bad for buying a $250,000 home.

The USDA Home Loan will lend up with a loan amount of up to 103.5% of the value so the down payment is $0.00

Round 1 goes to:  USDA Home Loan

Round 2; A look at the Up Front Mortgage Insurance or Guarantee..

FHA Home Loans require that you pay an Up Front Mortgage Insurance premium.  This premium has recently been reduced to 1% of the loan amount.  So for this example, the Up Front Mortgage Insurance premium due at closing would be $2,412.50.

The USDA Home loan has a similar feature, however the USDA calls it a USDA Guarantee Fee.  Currently the USDA Guarantee Fee has increased to 3.5%, so for this example the USDA Guarantee Fee would be $8,750.  This USDA Fee does get stacked on top of the loan and is why the USDA Home Loan is 103.5% of the appraised value.

Round 2 goes to:  FHA Home Loan

So after two rounds, if you are keeping score the amount financed for each loan would look like this:

FHA Home Loan = $243,662.50

USDA Home Loan = 258,750.00

Round 3; A look at the Monthly Mortgage Insurance Payment..

FHA Home Loans require an annual mortgage insurance payment equal to 0.9% of the amount financed, additionally it must be paid on a monthly basis.  So we are looking at a formula of AMOUNT FINANCED x 0.9% / 12.  For our example it would be $243,662.50 x 0.9% / 12.  So the monthly amount of mortgage insurance required on this FHA Loan example would be $182.75.

The USDA Home Loan does not have any monthly mortgage insurance payment.

Round 3 goes to:  USDA Home Loan

Round 4; A look at the Total Monthly Payment..

FHA interest rates and USDA Home Loan interest rates tend to be near or exactly the same on any given day.  So we are going to use an imaginary rate of 4.75 for illustrative purposes.

Since the FHA Loan is slightly smaller, the principal and interest payment would be $1,271.06.  Once you add the Monthly Mortgage Insurance into the payment, the monthly FHA payment would be $1,453.81.

The USDA Home Loan payment would come in at $1,349.76; even at a loan size nearly 7% larger than the FHA Loan.

Round 4 goes to:  USDA Home Loan

Apply for a USDA Loan Online Now: Loan Application

Round 5 – Since most families tend to own their homes for about 7-10 years, lets have Round 5 look at the bottom line amounts paid after 10 years.

On the FHA loan you will have paid:

$8,750 for the initial down payment + $174,457 in regular monthly payments for a total outflow of $183,207.

on the USDA Home Loan you will have paid:

$161,971 in total payments over 10 years.

Round 5 goes to:  USDA Home Loan

This is a very simple look at the differences between the USDA Home Loan and the FHA Home Loan.  There are many other aspects you may want to look at also, including the balance on the loan after 10 years and the total cost of ownership during that time.  While the USDA Loan will have a slightly higher balance at all times, the total cost of ownership will be substantially less.

Final Result:  The USDA Home Loan wins 4 rounds to 1.

To find out if you qualify or how much you can save each month with a new Rural USDA Loan, click on the Get Started on USDA tab above and ask for a quote.  If you want to go ahead and get your application in, you can fill out my Home Loan Application Online here.

This post has been made for simple comparative purposes only, however it does require an APR disclosure because it mentions an interest rate.  So here ya go… both loans are based on a $250,000 purchase price at 4.75% for 30 years.  Estimated APR for the FHA version with 3.5% down payment would be approximately 6.18 and an estimated APR for the USDA version at 5.15.

USDA Rural Development monthly mortgage payments

Did you know that for the same loan size and a similar rate that the USDA Rural Development Home Loan will ALWAYS have a lower payment than FHA?  Sometimes the USDA Rural Development payment will be substantially lower.

Let’s talk rates and payments…

When most people shop for a USDA Rural Development Mortgage the first thing they ask is… “What’s the rate?”  The problem is that they are often comparing rates for a USDA Rural Development home loan to an FHA Mortgage Loan or Conventional Loan.  Some of the time, the USDA Rural Development rate will be slightly higher, but not much.

You pay your monthly mortgage payment, whether it is USDA Rural Development or FHA or Conventional you do not pay a rate.  You make a payment based on Principal, Interest, Taxes and Insurance.

Apply for a USDA Loan Online Now: Loan Application

All FHA Mortgage Loans have an additional payment component, mortgage insurance.  USDA Rural Development Home Loans do NOT have this additional monthly expense.  It’s easy to calculate how much the monthly FHA Mortgage Insurance payment will be.  Here is the formula:

Loan Amount    x    0.55%     =    Annual Mortgage Insurance (divide by 12 for the monthly FHA Mortgage Insurance Payment)  NOTE:  In 2010 the amount of the Annual Mortgage Insurance increased from 0.55% to 0.9%.

Example:

A $200,000 USDA Rural Development home loan at 5.5% would have a monthly Principal and Interest payment of $1135.58.

That same $200,000 FHA Mortgage Loan would have that same Principal and Interest payment of $1135.58 but would also have the additional Mortgage Insurance Payment of $91.67 EVERY MONTH.  The USDA Rural Development Home Loan saves over $90 bucks a month over an FHA Mortgage Loan with the same loan amount and rate.

Have some fun and play around with our USDA Rural Development Mortgage Calculator and see for yourself the massive savings you can have with USDA Rural Development.

To find out how much USDA Rural Development Home Loan you qualify for today and how much you can save over an FHA Mortgage Loan, click on the Get Started on USDA tab above.

Apply online for a USDA Rural Development Home Loan and get pre-qualified today.

We’re starting a new category on the USDA Rural Home Loans website. It’s USDA Home Loan Success Stories. I hope you enjoy hearing about how the Rural Development USDA Loan has positively impacted so many families here in Arizona.  So let’s take a look at the first installment of… (drum roll please…)

USDA Home Loan Success Stories

An Arizona First Time Home Buyer with high debt to income ratios obtains an Arizona Rural Development USDA Home Loan.  Truly a wonderful ending to this one.

Kathy is a single mom working hard to find a great home where she could raise her two girls.  She had been working with a loan officer who offered an FHA Mortgage Loan pre-approval.  But the loan officer made one critical mistake and did not correctly calculate her income.  So instead of qualifying for the home, she was about to lose it. He told her she was turned down for her FHA Mortgage Loan application.

Apply for a USDA Loan Online Now: Loan Application

So Kathy was not about to quit, and she went online to look for an Arizona Mortgage Loan Expert.  That’s when she found us and I asked her some simple questions and saw why the other mortgage loan originator miscalculated the income.  It was obvious that although FHA Mortgage Loan financing can sometimes stretch debt ratios, this would stretch them too far.  Mostly due to some child support issues and the additional monthly mortgage insurance.

So I asked her if it would offend her to look at a USDA Home Loan (sometimes people have a misconception that USDA Loans must be used to buy farms).  I showed Kathy how a USDA Home Loan always has a SUBSTANTIALLY lower monthly payment than a similar FHA Mortgage Loan.  She was shocked and could finally see the light and the fact that she had a chance to really own this home.

We gathered all the appropriate documentation.  I asked Kathy to personally write a letter addressed to the underwriter explaining why she deserved this home for herself and her two girls.  It was touching and compelling.

About 7 days latter I received the USDA Loan Approval from the underwriter.  Guess who I called first.

Shortly after that call, Kathy closed on her loan and was in tears because her dream of having a home for her two girls had come true.

The next question I had for her was… “And don’t forget, you have the $8,000 First Time Home Buyer Tax Credit that you qualify for now!”

Another super satisfied client.  Another USDA Home Loan Success Story.

Do you know who will be our next USDA Home Loan Success Story?  To find out how much you qualify for today, click on the Get Started on USDA tab above.

Apply online for a USDA Rural Guaranteed Home Loan and get pre-qualified today.

USDA Loan Benefits

USDA Rural Home Loans have some outstanding benefits over ANY other type of mortgage loan you will find for Arizona.  USDA Loan Benefits include:

Apply for a USDA Loan Online Now: Loan Application

• True Zero Down Financing – USDA Rural Home Loans let you keep your cash in your bank account
• Fixer Up Ability – Repairs can often be financed for that Fixer Upper
• Zero To Move In – If properly set up, you wont need to bring any cash to closing.  The average is just about $158 or so to close with a USDA Rural Home Loan in Arizona
• Down Payment Assistance – Seller assisted Down Payment Assistance has been eliminated for FHA but is still available for USDA Home Loans.
• No Monthly MI - On a $200,000 home you could save up to $11,000 in mortgage insurance payments over the next 10 years as compared to FHA
• Apache County – Qualifies 100%
• Gila County – Qualifies 100%
• Graham County – Qualifies 100%
• Greenlee County – Qualifies 100%
• La Paz County – Qualifies 100%
• Navajo County – Qualifies 100%
• Santa Cruz County – Qualifies 100%
• The majority of the rest of Arizona also qualifies for USDA Rural Home Loans – Just outside Tucson, Phoenix, Kingman, Flagstaff OKAY
• Generous Qualifying Ratios – Due to low rates, No MI and superior performance of the USDA Rural Home Loan it is much easier to qualify than for Conventional or FHA Mortgage Loans
• Not just for First Time Home Buyers
• No HVCC Appraisal Backlog (like there are for Conventional or even VA loans)
• Permanent Rate Reductions

To find out how much USDA Rural Home Loan you qualify for today, click on the Get Started on USDA tab above.

Apply online for a USDA Rural Guaranteed Home Loan and get pre-qualified today.

USDA Rural Home Loans has a MASSIVE advantage in today’s Real Estate market.  We’ve all heard these terms…

NO MONEY DOWN! ZERO DOWN! 100% Home Loan Financing!

These options for financing a home are no longer available with conventional financing NOR through FHA home loan financing.  The best option for buying a home with No Money Down is with the USDA Rural Development Home Loan, which will fund up to 102% of the appraised value.

The USDA Rural Development Home Loan allows you to finance:

• Full Purchase Price
• Closing Costs
• USDA Guaranty Fee
• Rehabilitation Costs
• Repair Costs
• Appliances

Apply for a USDA Loan Online Now: Loan Application

How do you find a USDA Rural Development Home Loan property that qualifies?

First, click on our USDA MAPS tab to print out the map for the area you are interested.  Then a good place to look for an eligible USDA Rural Development Home is at www.Realtor.com.  Simply look for properties within the boundaries identified on your USDA Rural Home Loan map.

You can apply for a USDA Rural Development Home Loan here.

P.S. – It’s always a good idea to get prequalifed for a USDA Rural Home Loan before you go out shopping for a new home!

USDA Rural Home Loans offer many advantages over either FHA Mortgage Loans or Conventional Home Loans.  Here is a brief summary of advantages of the USDA Rural Home Loan.

Apply for a USDA Loan Online Now: Loan Application

• No Down Payment - Truly a 100% home loan
• No Expensive Mortgage Insurance – Keeps your monthly payment low
• No Cash Reserve Requirement
• No Minimum Credit History Requirement
• USDA 100% Financing is a top choice among First Time Home Buyers
• No Limitation to the purchase price
• May finance up to 102% of the appraised value
• Down Payment Assistance from non profits is acceptable
• Repairs may be financed up to 100% of the “as is” value
• No limits to the concessions the seller can make – seller paid closing costs
• Rates are typically lower than FHA Home Loans or Conventional Mortgages
  

USDA Rural Home Loans provides the lowest available rates, the lowest down payment and the lowest monthly payment of any loan available.  Call us today at 520-225-0380 for a current quote.  You’ll be glad you did!

Apply online now for a USDA Rural Home Loan.

Our USDA Rural Home Loan will save you a truck load of cash and help you keep your money in your own bank account after closing…

Here’s a quick comparison of the USDA Rural Home Loan and an FHA Mortgage Loan.

Apply for a USDA Loan Online Now: Loan Application

How Much Can Be Financed?

• 102% of the APPRAISED value! (finance up to $153,000 in this example)

FHA, Conventional or our USDA Rural Home Loan? Which is better for YOU?

You can apply for a USDA Guaranteed Rural Home Loan here.