usda loan program
Looming Government Mortgage Programs Changes
On October 1st, a new fiscal year will begin for the federal government and changes to programs will be made. These changes will include changes to the major government mortgage loan programs. VA, FHA and USDA mortgage programs will see changes and will go into effective on October 1, 2011.
VA loans are changing in a favorable way. The funding fee for these loans will be reduced from 2.15% to 1.5%. VA loans have the least default rate of any government guaranteed mortgages and this lower rate is considered in the reduction in the loan fees.
Major change to FHA loans will affect buyers, sellers and mortgage lenders. The maximum mortgage amount of FHA loans is being lowered appreciably. The highest available limit varies by location, but in a number of regions, the limit is going to fall by more than 35%. The fall in the highest loan amount is based on the reduction of home prices and values over the past few years. These new maximum amount rates will go into effect October 1st.
Rural development loans, USDA home loans are going to be affected in three ways. First, the loan funding fee will drop from 3.5% to 2.0%. This is good news, but, there’s another change that balances the reduction.
The second balancing change for USDA loans is that for the first time, mortgage insurance will be necessary for USDA backed mortgages. This mortgage insurance premium (MIP) will be fixed at 0.3% yearly of the loan value.
Let’s look at how these changes work against each other. For a $100,000 loan, you will initially $1,500 less in the funding fee, but will pay $300, or 0.3%, in mortgage insurance. The payment will come out monthly at about $25. As you can see, the difference will be in your favor for the first 5 or so years, but then you’ll keep funding the MIP for the length of the mortgage.
The final change for USDA loans is a modification to the USDA eligibility maps. These maps show homes (houses and condos) in areas eligible for USDA mortgages. On account of development in many regions, homes in suburban locations are at present eligible. This will change on October 1st. In spite of this, be certain to check with a USDA mortgage specialist because lots of areas that you might not consider eligible will still be included in the maps. Not only that, selecting a home just a few miles away, might permit you to take advantage of the USDA program.
Government mortgage loan programs make available guaranteed mortgages that require smaller or no down payment and less stringent credit requirements. If you can qualify, these loans will allow you to buy a home with less money down and less money out of pocket for closing costs.
Why Rent? USDA LOAN PROGRAM 100% FINANCING STILL EXISTS
Home purcheser buying a Fannie Mae house pays the sellers closing costs?
I am required to sine a contract from Fannie Mae to pay their closing, what does this mean and how much could this be. I chose to finance usuing the USDA rural development loan program and am not sure if I can finance these costs into my loan. Is this a bad deal?
Yeah… that’s weird. I’ve never heard of a buyer paying the seller’s closing costs before. If you want the house bad enough, I guess it’s probably worth it. I can’t give you a great estimate, but I would think you might pay similar to the buyer’s costs (tack on another 3% of the price). You should ask your mortgage broker if they might be able to break this down for you. These costs would not roll directly into your loan. If, on the other hand, the seller is just asking for a higher asking price, so that you are covering their fees, then it could go into the loan. The only problem there is that if the house doesn’t appraise high enough to accommodate the seller’s fees, you will not get the loan.
So yes, basically you should talk to the people on your side about this (your real estate agent and your mortgage broker) and see what they have to say. They will have a much better idea.