USDA vs FHA, Which Loan is Better For You?

Finding the right loan program can be a long drawn out process. Get everything you need to know here as Angelo talks about the differences between the USDA and FHA.

Hey guys it’s angelo christian with another great edition of real estate insider and today we’re going to be talking about the difference between usda loans and fha loans you know a lot of people always ask me you know hey angelo what’s the difference between a usda loan and fha loan and why would i want one over the other which one is better for me and so today

We’re actually going to be comparing usda loans compared to fha loans and see which one’s gonna be a better loan program based on what you’re trying to do so first off let’s start out with a usda loan what is it so a usda loan is a you know usda is the united states department of agriculture they grade the meat and poultry of the united states so there’s also

A residential side to the usda and that’s what we specialize in it’s called the five zero to the guaranteed home loan there’s two different types of usda residential housing loans there’s a 502 guaranteed and there’s a 502 direct and so what we do is the 502 guaranteed which is for residential housing and that’s for people to have higher incomes typically north

Of up to $150,000 of annual household income the direct loan is for people to have incomes usually below $40,000 per year that you get directly from the united states department of agriculture so the the 502 guaranteed loan is made by a bank like us and then guaranteed by the department of usda and it’s for people that generally make total household incomes under

150,000 it’s all based on the county so on the usda website you’ll see the usda website here you can go and plug in how many people are in your home and what county you’re in they’ll tell you what the income limit is for your county and so it normally goes up to $150,000 and as long as you make below that you can qualify for a zero down 100% financing there is

No down payment with usda and you can get your closing costs either paid by the seller financed into the loan or you could pay your own closing costs out of pocket with usda now with usda it is geographic based so you can’t use the usda loan in a metropolitan area so like a large city like los angeles miami chicago houston you won’t be able to use the usda loan

But you can use it on the outskirts of a major metropolitan city or a small city typically that has a population below 20,000 people and on the usda website here you can actually check out type in the address of the home that you’re looking at to see if the property is approved the other thing is that usda for the 502 guaranteed is for residential single-family

Homes it’s not for farms it’s not for ranches mixed use properties we have loans for those type of programs but now with the usda 502 guaranteed loan the other thing with the usda loan you cannot own any other real estate at the time of closing on your usda loan unless you own a house somewhere else in another city or state and you’ve been transferred or that

House has been leased out they really don’t the underwriter really doesn’t like you to own other real estate properties and then you try to use the usda less now the usda loan is not for first-time buyers you do not have to be a first-time buyer but the thing is is that they want to make sure that someone’s not trying to accumulate properties and take advantage

Of the system with using zero down so but it is a great program and it’s available nationwide even in hawaii alaska all 50 states the usda program is available but it’s for rural areas and and you can find here on the usda website that’s gonna be posted what areas are approved for usda and also what your income limit is the thing about the income limit there are

Deductions that are allowed like for work-related expenses medical medicaid those type of work-related expenses are allowed as deductions that you can deduct off of your your gross earnings that can help you to qualify for more so the best thing is to talk to an expert like me that knows about the the deductions and usda qualifications just to make sure you’re not

Counting yourself out because you want to make sure that you don’t make a mistake and you disqualify yourself for the loan where i might know something at how i can get you approved for example with the usda loan there’s more people living in the house than you can qualify with more income meaning that there’s four people or five people the usta income allowance

Goes higher because there’s five people versus four people so don’t just read the stuff that’s online and think that you don’t qualify talk to somebody that’s an expert that can figure out how to get you into the loan how to make it work that’s how the usda loan works they typically they are more strict on the debt ratio requirements they typically four six

Forty the minimum credit score for usda 620 all right so 620 to 640 credit score your debt ratio they don’t want your house payment to exceed 29 percent of your income and they don’t want your total debt ratio to exceed 41 percent of your income now if you have excellent credit and i see of a 747 80 credit score then your house payment can be under about thirty

Three percent of your income and then your total debt ratio has to be below forty five percent of your income all right that’s for an excellent credit with the usda all right so you can’t have a bankruptcy in the last three years no foreclosure in the last three years we do have to verify full income documentation with your tax returns and your pay stubs if

You’re retired we can use fixed income there’s no age discrimination you can be any age to buy get a usda loan and it’s for single-family properties multi-units are typically not allowed and mobile homes they have to be brand new mobile homes pre-owned modulars okay but those are the general requirements with usda now with fha it’s a different program it’s like

The usda and the fact that it’s a government-sponsored loan but with fha you can buy in a rural area or you can buy in an urban area okay so you can purchase let’s say that you’re in colorado springs and you want to use fha you can buy get an fha loan inside of colorado springs or you go on the outskirts of colorado springs of the mountains and use usda like in

Woodland park or if you’re if you’re in orlando you can use fha for orlando or if you’re in haines city right of orlando you could use fha there’s no location restriction whereas with a usda loan there’s you there’s location restrictions there’s a boundary and you have to follow the map of usda to tell you where that boundary is so the fha it doesn’t matter

Where you’re located the other thing with fha there’s no income requirements so it doesn’t matter if you make sixty thousand or three hundred thousand dollars a year you can use the fha alone it doesn’t matter so that’s another really flexible thing i like to think of the fha loans it has more flexible options and also you can go down to a five hundred credit

Score with fha if you’re under 580 credit score you just have to put 10% down if your 580 or higher you just have to put three and a half percent down so it’s a very small down payment you can have that money gifted to you or have funds on hand or have it from your 401k or retirement or what have you so or if you’re buying a house from your family you could use

A gift of equity and get your downpayment rolled into the loan and the closing costs worked the same you can have the seller pay your closing costs closing costs can be rolled into the mortgage or you could pay your own closing costs out of pocket the other thing with fha they’re much more liberal more generous with the debt ratio requirements the debt ratio

That you can go up to with an fha alone is up to 56% of your back end of your debt ratio if you have a 620 or higher credit score typically if your scores below 620 your debt ratio has to be under 50% and there’s also they’re more flexible like if you had a bankruptcy like for example a chapter 7 you could still get an fha loan if your bank bankruptcy was over

Two years old if you had a foreclosure they typically want to see that you’re out of foreclosure for three years and you can also do brand-new manufactured pre-owned manufactured modular mobile single-family you can do a lot with fha the usda is going to be more restricted and so that’s one thing i really like fha and the thing is that with us we can pre approve

You for both options you might come to me and say hey angelo i don’t know which way i want to go i can give you a loan approval for both fha and you da and then you can decide what you want to do because you may want to have both and then that way you have the flexibility to choose which way you want to go so but at the end of the day you have to choose one one

Loan program and you know they’re both really good i love both of them i’ve helped thousands of people buy their home with both fha and usda fha is more flexible has more options but usda still very good and with fha you know a three and a half percent down payment is still very little both loan programs do have mortgage insurance so the mortgage insurance is

0.85 percent on an fha loan it’s 0.35 on a usda loan it stays on there for the life of the loan the only way to get rid of the mortgage insurance is if you refinance that loan and your taxes and insurance are required to be included in your house payment so whenever you make your monthly house payment you have to include your property taxes and your insurance

And the mortgage insurance and so they’re both fixed-rate low fixed rate mortgages there’s no penalties on the loans there’s no balloons the loans are suma ballif later on you want to pass the home on to your heirs with qualifications they can assume those mortgages with both fha and usda okay and like i said there’s no penalty you can pay off a loan any time

You can refinance the loan any time you can sell the home anytime there’s no restrictions on that these are for owner-occupied properties you can’t be an investor and use the fha and usda loser for primary residence not secondary homes not investment homes but those are the differences between fha versus usda obviously usda people like it because of zero down

And there is no down payment but it may not work for your income might be too high or you might not want to live in a rural area so we may have to look at fha so it’s not a bad thing it’s still okay we just got to look and see what options gonna be better for you so if you’re looking to get pre-approved to buy a house and you want to go fha or usda i’ve been

Considered the king of usda i’ve helped the most people with the program give us a call my name is angelo christian you can click on the link below to get signed up we can get you pre-approved and also we also help with realty the downpayment assistance the grant programs or you can call my office you know at two eight one eight one seven home or eight three two

Four three one six three three one that’s eight three two four three one six three three one if you want to get pre-approved there’s a link below to get signed up right there there’s no application fee there’s no deposit there’s no contract you don’t pay anything to apply we can also help you boost up your credit score to get you qualified to get you pre-approved

And connect you with the realtor so you can start home searching and again with both programs you can buy a brand new home you can buy an existing home you can build a house you can do foreclosures you can do renovations there’s a lot of things that you can do with both programs and it’s available nationwide so if you’re looking to get pre-approved you want to

Get help give me a call or click on the link below to get signed up there’s absolutely no fees or contract to get started my name is angelo christian i’ve been in the business now for over 15 years i’ve lent almost a billion dollars in loans and helped over thirteen thousand families all over the country you may have seen me on bloomberg cnn business insider a

Good morning houston and good morning america of all the people that i’ve helped and so i’d love to help you if you’re looking to get help to get pre-approved to buy your new home i’m really excited guys thank you so much for checking us out on real estate insider we do three great shows every single week on youtube real estate insider learning hub and influencers

Where we come out to educate you guys on real estate finance and mortgage lending and trying to just empower you so you see you can be better so that’s what that’s our mission here we don’t charge anything and if you have any comments leave them down the chat box below please share all this information with your friends and family so they can be educated to make

The best loan decision when they want to buy a home my name is angelo christian this is a real estate insider thank you so much for checking us out take care and peace out bye-bye you you

Transcribed from video
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