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USDA Home Loan

Does USDA Home Loans require Mortgage Insurance? Are their intereat rate higher?
Thank you!
  • April 25 2014 - Warner Robins
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Answers (8)

The 2.04% guarantee fee is the "upfront" portion of the mortgage insurance, and is added to your loan balance at closing.  The annual fee of .4% of your loan size is paid monthly, as with conventional or FHA financing.  Couple of points to consider.  The home does have to be in a USDA eligible area (typically rural or close to rural), borrowers cannot own another home, cannot make more than the USDA limit for their family size and geographic area, and ALL household income counts against that limit.  If your spouse or anyone else who is going to occupy the home has had recent income, it will be counted against the total income you're allowed to have.

USDA loans are great for those who qualify, but it's really important to work with a lender who fully understands the program and can advise you on what to expect.

Hope that helps.  I write USDA loans nationally, be glad to answer any further questions.  Feel free to contact me through my profile.

Thanks,

Ted
  • April 27 2014
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The USDA charges an upfront 2% Guarantee Fee that can be financed, paid at closing by you, the seller or the lender. In addition, they charge at .40% of the base loan amount called the Annual Renewal Fee. As of this writing, it is indefinite meaning it does not self release. The rates are competitive with FHA and VA. Dollar for dollar, it's the best loan program out there other than a VA loan. $0 Down, low rates, low MI, and easy qualifying. Man! how can you beat that?
  • April 26 2014
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USDA loans usually require mortgage insurance. Although mortgage insurance is included in this type of loan, I believe it is still worth the benefit of the required 0% down payment. Also, the rates can be pretty competitive and can be in the same range or even lower than some conventional rates. This is a great loan that I recommend you look into. The best thing for you to do is to speak with a knowledgeable lender to see if you can get started on financing a new home. If you need additional assistance, feel free to reach out. Good luck!
  • April 25 2014
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Profile picture for GMerino
No, it is a one-time upfront guarantee fee that is charged to the lender and it is passed onto the applicant (borrower).  Guaranteed loans are subject to payment of an annual fee - keep in mind that this fee that is passed on to you is financed into the loan.  Hopefully not to confusing!
  • April 25 2014
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Profile picture for Newbie80
I see some lenders added 2% guarantee fee, Is that on top of the Mortgage Insurance. Does the quarantee fee replace the mortage insurance?
  • April 25 2014
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Profile picture for Outer Banks N C
Plus USDA can't be just anywhere, they have approved areas the property must be in and it is usually rural.
  • April 25 2014
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Profile picture for Arizona Mortgage Pro
USDA home loans have mortgage insurance, but it is a much smaller payment than it would be on an FHA loan. The interest rates are very competitive with other loan products. USDA loans offer many advantages, including 100% financing, but they have property and income eligibility requirements that must be met. A local lender can walk you through the eligibility requirements and pre-qualify you for a USDA loan. 
  • April 25 2014
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Profile picture for GMerino
USDA home loans do require mortgage insurance but significantly lower than FHA.  The interest rate are typically lower than a regular conventional loan.  It is a great product.
  • April 25 2014
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