USDA- Direct Loan

[jbee]

I found out today that my income qualifies for the USDA direct loan.

Can someone give me the advantages vs disadvantages of going the direct loan route vs guaranteed loan.

Thanks!

[jbee]

Also, does anyone know if the new fee increase apply to direct loan or just guaranteed loan?

Thanks

[Anonymous]

For one, the Direct Loan program still has money as far as I know.

Here are some other differences:

1) DLs are drectly funded by the goverment. GLs are funded by the buyer and backed by the government.

2) DL mortgage payments are based on the household's adjusted income. GL mortgage payments are based on type of plan (just like FHA).

3) DLs are for up to 33 years (38 for those with incomes below 60 percent of AMI and who cannot afford 33-year terms). The term is 30 years for manufactured homes. The promissory note interest rate is set by HCFP based on the Government’s cost of money.  However, that interest rate is modified by payment assistance subsidy. GLs  Loans are for 30 years.  The promissory note interest rate is set by the lender.

[jbee]

Thanks freudandbeck.  I think I understand it better now.

[Anonymous]

No problem. This was all completely new to me until I started the home buying process a couple of months ago. Hopefully, I saved you a little time. If I were in your shoes, I would definately go with a direct loan. Of course, if you can afford a downpayment and closing costs, you might find that an FHA is the better way to go. Direct loans can make monthly payments much more managable, depending on your circumstances, but it can take a long time to pay off the house.

[jbee]

If I'm understanding correctly, I was told that with the direct loan I could do it over 30 years.  Also, I should graduate next December, so my income should increase dramatically and hopefully I will be able to cover most of the cost myself.   I'm going through a divorce, so this is my first time having to do all of this. 

Ok, I'm thinking out loud.  If I went FHA, I would probably qualify for less and my payments would be probably 100-150 more, right???  I say this because I hear with direct loan you're able to afford a nicer home and a lower monthly payment because there's no PMI and you normally have a realy low interest rate (2-4%).  Please let me know if this is how you understand it too.

 I apologize for all of the questions.