USDA or FHA? Which loan is better? 

Time again and again we always get asked which loan is better? What are the differences between these two programs and which one is best for my situation?

First it's important to realize that both FHA and USDA are Government Home Loan Programs. This means that the Government insures or guarantees the mortgage.  This is a huge advantage when looking for a home loan. By the government guaranteeing the mortgage this means easier qualifications for you, less money out of pocket, low interest rates. USDA vs FHA

Here are the facts:

USDA Loans:

  • If you have not already guessed the USDA loan is ideal for rural or semi-rural areas.
  • 100% financing. No down payment
  • No credit score or 620 credit score requirement
  • Can use rental history in lieu of credit
  • Can get cash back for repairs or Improvements
  • Income cap per the county
  • No purchase price limit
  • Small PMI payment

FHA Loans:

  • Eligible for rural and urban areas
  • $0 down available for 640 or better credit score
  • 3.5% down for credit scores below 640
  • Credit score down to 500 acceptable
  • Can get cash back for repairs or Improvements
  • No income cap
  • Loan cap usually around $271k
  • Can be used for mobile home, building a home
  • Hefty PMI payment

In summary, then I would say to each their own. USDA certainly offers more benefits; sometimes USDA will not work for some people’s situations or specific needs. If you can get a USDA I would opt for this first.

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