Cons of USDA rural development loan & FHA loan?

We are looking at homes and would like to know more about the USDA rural development & FHA loan. Our credit score is good. I would like to know the cons and the things to think about and consider with each loan. thanks!!

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  • Anonymous
    1 decade ago
    Best Answer

    USDA - Cons

    1) You have to buy a home in an approved USDA area.

    2) You can only make a certain amount of income for the area.

    3) Tighter debt to income ratio requirements.

    4) 2% "Funding" fee that is rolled into the loan

    USDA - Pros

    1) Lower credit score requirements

    2) No money down

    3) No monthly mortgage insurance payment

    4) Will allow 102% financing to help cover closing costs.

    FHA - Cons -

    1) 1.75% upfront mortgage insurance premium rolled into the loan

    2) FHA has stricter requirements when it comes to the appraisal and condition of the home.

    3) County loan limits

    FHA - Pros -

    1) Only need 3.5% for a down payment

    2) Streamline refinance option

    3) Lower credit score requirements

    4) Debt to income flexibility

    Source(s): I'm a mortgage banker/broker
  • 1 decade ago

    USDA has very long loan processing times. Very frustrating for sellers who are anxious for the sale to close. Put in 120 days to close or you might lose your earnest money.

    FHA and USDA are both for people with bad credit. They have higher fees than conventional loans.

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