Super Contributor
ShanetheMortgageMan
Posts: 8,252
Registered: ‎09-28-2007
Re: Evaluating Conventional vs. FHA (VA & USDA)

 


nacol1994 wrote:
Update: Certificate of Eligibility shows total entitlement charged is $65K with basic entitlement of $0.  Lender thinks this means I am not eligible for a VA loan however, I discussed this w the VA loan center and was informed I had approx $40K remaining in 2nd tier entitlements.  The base price of the home I want to buy is $185,990 which means I would need a down payment around $7K.  Lender is requiring that I obtain a letter from the VA stating my remaining entitlement for the purchase of the home with all calculations.  Anyone ever received such a letter from the VA?  As for Purchase price I looked at the Guaranty examples on the VA website but am unsure if this price includes or excludes fees/closings, etc—assumption is that it is simply the base price with nothing else included.  Is this a correct assumption?  Any thoughts on this situation would be appreciated.  Thanks

 

That is correct - if you have $0 basic entitlement and $40k remaining in 2nd tier then that provides a 25% guarantee on a $160k loan amount, anything exceeding that sales price would require a 25% down payment on the additional amount (ex. $250 down on $1k increase in price)... but one needs to have a total loan amount which exceeds $144k in order for that 2nd tier entitlement to kick in.  Purchase price always is the purchase price from the seller, nothing more (energy improvement items, fees, etc).

 

The letter from VA is a requirement of many lenders, and VA should be able to provide you a letter.  Contact the RLC that covers your state.

Established Member
halle101
Posts: 39
Registered: ‎04-22-2011
Re: Evaluating Conventional vs. FHA

The thing with USDA though is that one would also have to meet the income requirements, we were told that we made too much to qualify for an USDA mortgage.

Super Contributor
ShanetheMortgageMan
Posts: 8,252
Registered: ‎09-28-2007
Re: Evaluating Conventional vs. FHA

halle101 wrote:

The thing with USDA though is that one would also have to meet the income requirements, we were told that we made too much to qualify for an USDA mortgage.


Yeah it's not for everyone - there are two income limits though, the "Direct" version is a lot lower than the "Guaranteed" version.

New Member
akinsey206
Posts: 5
Registered: ‎06-27-2011
Re: Evaluating Conventional vs. FHA

Hi Shane,

 

You mentioned that, in October 2011, guaranteed USDA loans will have a .03% monthly fee added to the loan, can you elaborate more on this?  Would it be in my interest then, to make sure and get my loan before then in order to avoid these extra fees?

 

-Anthony

Super Contributor
ShanetheMortgageMan
Posts: 8,252
Registered: ‎09-28-2007
Re: Evaluating Conventional vs. FHA

akinsey206 wrote:

Hi Shane,

 

You mentioned that, in October 2011, guaranteed USDA loans will have a .03% monthly fee added to the loan, can you elaborate more on this?  Would it be in my interest then, to make sure and get my loan before then in order to avoid these extra fees?

 

-Anthony


Yes I created a post on it at http://ficoforums.myfico.com/t5/Mortgage-Loans/USDA-GRH-fees-are-changing-Guaranteed-only-not-Direct...

New Visitor
Feeding10inAZ
Posts: 2
Registered: ‎07-03-2011
Re: Evaluating Conventional vs. FHA

If someone qualifies for the "Direct" and "guaranteed" loan, what is the advantage of one over the other?

 

Thanks!

Super Contributor
ShanetheMortgageMan
Posts: 8,252
Registered: ‎09-28-2007
Re: Evaluating Conventional vs. FHA

The primary advantage of the Guaranteed loan is you go through a mortgage lender, which is quicker than going directly to USDA, that's about it.

 

The advantages of the Direct program is that they have a construction loan program, it's easier to get financing on manufactured homes, they have a payment subsidy option if your debt to income ratio is too high (has tax implications though), there is no Guarantee fee, and there is no monthly USDA fee either.

 

Interest rates should be the same for both versions, in the 4.5% to 4.75% range.

New Member
Hizzo
Posts: 3
Registered: ‎07-31-2009
Re: Evaluating Conventional vs. FHA (VA & USDA)
Hi Shane! I appreciate all of the valuable info that you are sharing with us on the forum. I have been reading all of your threads as I am getting myself ready to purchase a home by the end of this year. I want to go for an FHA loan but I think my problem will be the debt to income ratio due to write offs on my tax return. Do the underwriters view different types of write offs differently or is the AGI the main focus? Also, I filed taxes jointly with my wife last year but do not want to include her in the loan due to her low credit scores, is it possible to exclude her and still use her as a source of income? My credit scores are 690 TU 650 EQ and 660 EX plus score. Income last year of $33K and wife about $30K. This year income of $40K and wife $36K. Last year's AGI $50K after a business loss write off of $12K. I have credit balance of only $300 and student loans of $28K that are deferred until May 2012. What are my chances at qualifying for an FHA loan in Miami, FL and for how much based on the info I provided? Your response is very important to me.

Starting Score: EQ 598
Current Score: EQ 648 TU 706 EX 694
Goal Score: EQ 670 TU 720 EX 710


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Established Member
sweetpea3829
Posts: 32
Registered: ‎01-04-2011
Re: Evaluating Conventional vs. FHA (VA & USDA)

We're in the middle of a USDA Direct purchase.  It's a nightmare.  I'd swear to emphasis how much of a nightmare but I find vulgarity to be generally unneccessary.  Just know that the hassles are worthy of a swear.

 

We're going on our fourth month under contract.  Every single step along the way has been painful.  Much more painful than it's needed to be.  We keep telling ourselves it will be worth it in the end when we can have that nice lower subsidzed payment.  But right now...we're ready to just rent forever. 

 

Shane...what are those tax implications you were talking about in regards to that subsidy?  I know about the recapture, but what kind of implication will we expect on our yearly tax return?

Super Contributor
ShanetheMortgageMan
Posts: 8,252
Registered: ‎09-28-2007
Re: Evaluating Conventional vs. FHA (VA & USDA)

Yeah it's the recapture tax - sorry I am not certain what kind of impact it'll have on the income tax refund/amount you owe, you'd have to talk to your tax preparer and run the scenario by them.