Is my broker telling the truth?

[jcstarkey8826]

My broker seemed like he was trying to scare me away from USDA. I dont know why he would want to do so, but I told him the only reason we wanted USDA was because the area we were moving was eligible, and the 0% down was just icing on the cake.

He started off by saying that USDA is VERY slow, and warning me it can cause issues with sellers waiting on USDA to process everything. I said this was fine to us, as we are in no rush, and would like to let the sellers know when we make an offer that it is USDA (he said talk to the realtor about that) in hopes that they will understand it is a little slower and not get upset with the process.

Then he said that with USDA the govt could kick you out at the drop of a hat. If you missed one payment they could come in and pretty much do as they please. If you make a late payment by accident they will jack up your rate, and you have to keep track of all that live there and account for everyones income etc.

Im even ok with this, as our savings is enough to cover all bills if we both lost our jobs for six months, also when it comes to losing your house, we always have family to lean on and we try to be as prepared as possible. I dont ever anticipate a later payment either, but you never know... automatic payment screw up, lost check in the mail, etc. anything can happen.

So USDA borrowers... Is this true? Should I just go FHA like he is suggesting and just avoid it? Im a few months away from the pre-approval process and want to make sure Im doing whats best for us. We can do an FHA. Like I said, the 0% was just icing on the cake, but 3.5% down is fine with us as well if its a better option.

Thanks in advance!

[webhopper]

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@jcstarkey8826 wrote:

My broker seemed like he was trying to scare me away from USDA. I dont know why he would want to do so, but I told him the only reason we wanted USDA was because the area we were moving was eligible, and the 0% down was just icing on the cake.

He started off by saying that USDA is VERY slow, and warning me it can cause issues with sellers waiting on USDA to process everything. I said this was fine to us, as we are in no rush, and would like to let the sellers know when we make an offer that it is USDA (he said talk to the realtor about that) in hopes that they will understand it is a little slower and not get upset with the process.

Then he said that with USDA the govt could kick you out at the drop of a hat. If you missed one payment they could come in and pretty much do as they please. If you make a late payment by accident they will jack up your rate, and you have to keep track of all that live there and account for everyones income etc.

Im even ok with this, as our savings is enough to cover all bills if we both lost our jobs for six months, also when it comes to losing your house, we always have family to lean on and we try to be as prepared as possible. I dont ever anticipate a later payment either, but you never know... automatic payment screw up, lost check in the mail, etc. anything can happen.

So USDA borrowers... Is this true? Should I just go FHA like he is suggesting and just avoid it? Im a few months away from the pre-approval process and want to make sure Im doing whats best for us. We can do an FHA. Like I said, the 0% was just icing on the cake, but 3.5% down is fine with us as well if its a better option.

Thanks in advance!

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This doesn't sound accurate, I would check with a different broker or lender before you accept his word as truth. Its likely that he gets a better compensation for FHA than he does with USDA.

[jcstarkey8826]

Thats what Im afraid of. I just want accurate answers and he didnt seem too confident in what he was saying. It seemed like scare tactics.

He works with 620 mid score, and if myfico calculator is anywhere close to accurate, I should be around 650-660 in 3 months. I want to work with someone who uses 620 mid just to be safe. I will get my score as high as possible obviously, but Id rather be safe knowing the inqs shouldnt drop my scores below 620, but with 640 im not sure. So far he is the only person ive contacted that can work with 620 mid, but ive only called a few brokers. So maybe i'll keep checking around and try to find someone working with 620 mid and see if they are more helpful and encouraging? or maybe USDA isnt really the best option for me lol I have no clue

[FrugalRican]

What's the lowest the other brokers would work with?

[webhopper]

USDA Loan vs FHA Loan Total Cost Of Ownership

***UPDATED FOR APRIL 2012 FHA CHANGES***
Assuming the following -

• $300k purchase price and 300k appraised value
• 4% fixed interest rate on a 30 year fixed loan
• Home is located in an USDA Eligible Area

Loan Type Down Payment Monthly Mortgage Insurance Location Restrictions Income Limits Loan Limits Minimum Credit Score Loan Types Up Front Mortgage Insurance

USDA  0%$ .0.3% Yes Yes 417k 620* Only 30yr Fixed 2%

FHA  3.5% 1.25% No No Location Specific 620* Too many to list… 1.75%

* Minimum credit scores are set by the lender

Length- 30yr | Rate- Fixed 4% Up-Front Mortgage Insurance Down Payment Total Loan Amount Financed Monthly Mortgage Insurance Monthly Payment – Principal + Interest + MIP Amount paid in monthly payments after five years Total $$$ spent after five years Amount owed after five years

USDA $6,000 $0 $306,133 $76.50 $1538 $92,280 $92.280 $276,890

FHA $5,250 $10,500 $294,566 $306.84 $1,713 $102,480 $113,280 $266,428

USDA – total of $92,280 out of pocket over five years and still owe $276,890. If the house sold for net 300k you would profit $23,110

Subtract the profit $23,310 from the expense $92,280

Total Cost Of Ownership Is = $68,970

FHA- total of $113,280 total out of pocket over five years and still owe $266,428. If

 

FHA vs USDA loan

the house sold for net 300k you would profit $33,572

Subtract profit $33,572 from the expense $113,280

Total Cost Of Ownership Is = $79,708

Difference – USDA Loan is about $10,738 cheaper after five years

That might not seem like a ton of money however considering you save $175 per month and the fact that you dont have to come up with 10k+ for down payment + closing costs, it makes USDA a clear winner over FHA.

[webhopper]

USDA is a good option, if your current broker won't work with you, tell him you'll walk and find someone who will. Mortgage folks are a dime a dozen and I believe that this guy has ulterior motives for steering you towards an FHA loan.  FHA loan is probably one of the more expensive loan types to have.  Conventional loans and USDA are better in my opinion.  FHA is great for homes for first time homebuyers who are buying in a location not supported by USDA. 

[tooleman694]

I have spoken with a few brokers about USDA and everyone tell me to run away. They say go FHA or Conventional.

I really wanted USDA, but conventional is the next cheapest option.

[jcstarkey8826]

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@webhopper wrote:

USDA Loan vs FHA Loan Total Cost Of Ownership

***UPDATED FOR APRIL 2012 FHA CHANGES***
Assuming the following -

• $300k purchase price and 300k appraised value
• 4% fixed interest rate on a 30 year fixed loan
• Home is located in an USDA Eligible Area

Loan Type Down Payment Monthly Mortgage Insurance Location Restrictions Income Limits Loan Limits Minimum Credit Score Loan Types Up Front Mortgage Insurance

USDA  0%$ .0.3% Yes Yes 417k 620* Only 30yr Fixed 2%

FHA  3.5% 1.25% No No Location Specific 620* Too many to list… 1.75%

* Minimum credit scores are set by the lender

Length- 30yr | Rate- Fixed 4% Up-Front Mortgage Insurance Down Payment Total Loan Amount Financed Monthly Mortgage Insurance Monthly Payment – Principal + Interest + MIP Amount paid in monthly payments after five years Total $$$ spent after five years Amount owed after five years

USDA $6,000 $0 $306,133 $76.50 $1538 $92,280 $92.280 $276,890

FHA $5,250 $10,500 $294,566 $306.84 $1,713 $102,480 $113,280 $266,428

USDA – total of $92,280 out of pocket over five years and still owe $276,890. If the house sold for net 300k you would profit $23,110

Subtract the profit $23,310 from the expense $92,280

Total Cost Of Ownership Is = $68,970

FHA- total of $113,280 total out of pocket over five years and still owe $266,428. If

 

FHA vs USDA loan

the house sold for net 300k you would profit $33,572

Subtract profit $33,572 from the expense $113,280

Total Cost Of Ownership Is = $79,708

Difference – USDA Loan is about $10,738 cheaper after five years

That might not seem like a ton of money however considering you save $175 per month and the fact that you dont have to come up with 10k+ for down payment + closing costs, it makes USDA a clear winner over FHA.

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That seems like a lot of money! lol Im extremely frugal accoring to my GF, but to me if it saves me money in the long run, Im in. I dont know enough about the USDA program to know if he was accurate or not, but it just seemed pressured. I'll call around some more and see if anyone can work with 620 and is nice about it.

Anyone in the Michigan area that knows of anyone PM me.

and rican, most are wanting 640, which is fine if I have to, but I would prefer someone with more breathing room.

[jcstarkey8826]

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@webhopper wrote:

USDA is a good option, if your current broker won't work with you, tell him you'll walk and find someone who will. Mortgage folks are a dime a dozen and I believe that this guy has ulterior motives for steering you towards an FHA loan.  FHA loan is probably one of the more expensive loan types to have.  Conventional loans and USDA are better in my opinion.  FHA is great for homes for first time homebuyers who are buying in a location not supported by USDA. 

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Unfortunately I dont have the score needed for conventional or the 20% down. USDA is where I was hoping to start.

[webhopper]

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@jcstarkey8826 wrote:

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@webhopper wrote:

USDA is a good option, if your current broker won't work with you, tell him you'll walk and find someone who will. Mortgage folks are a dime a dozen and I believe that this guy has ulterior motives for steering you towards an FHA loan.  FHA loan is probably one of the more expensive loan types to have.  Conventional loans and USDA are better in my opinion.  FHA is great for homes for first time homebuyers who are buying in a location not supported by USDA. 

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Unfortunately I dont have the score needed for conventional or the 20% down. USDA is where I was hoping to start.

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Conventional is possible with 680 mid score and 5% down....   If you want to go USDA its worth interviewing other brokers... even if they aren't local.