Introdution to USDA and FHA Loans! Generally speaking, USDA (Unites States Department of Agriculture) and FHA loans are both great options for those looking to purchase a home. But how do they compare in terms of eligiblity requirements? While the two loans have many similarities, there are also some key differences that should be kept in mind.
The What is the Difference Between an USDA Loan and an FHA Loan? is that the previous is designed for country homes as well as the latter is available for properties in both city as well as backwoods. Firstly, when it comes to credit scores, an FHA loan typically requires a minimum score of 580 or higher whereas with a USDA loan this number is much lower at 640. Furthermore, while with an FHA loan you can put down as little as 3.5%, USDA loans require no down payment at all! For income limitations, unfortunately the FHA tends to be much more strict; you must make less than 115% of your area's median income whereas with the USDA loan it's up to 80%.
Additionally, another big difference between the two is location: an FHA loan can be used anywhere in the country whereas a USDA loan is only offered in certain rural areas. Lastly, while both programs offer competitive interest rates and low closing costs they differ slightly when it comes to mortgage insurance: With an FHA loan you'll pay 1.75% upfront followed by 0.8%-1.05% annually whereas with a USDA Loan it's just 0.35%-0.5% annually without any upfront cost – making it quite attractive for low-income households!
If you're wondering, What is the Difference Between an USDA Loan and an FHA Loan? is that the former is made for country residential or commercial properties as well as the latter is offered for buildings in both urban as well as rural areas. In conclusion, while there are many similarities between these two types of mortgages there are also several key differences that should be taken into account when deciding which one is right for you. The decision ultimately boils down to your individual situation and needs so we suggest researching thoroughly before taking out either type of loan!