There are some changes being made to the USDA home loans program beginning October 1, 2011. The changes appear to offset each other, but may change the maximum loan amount for some borrowers.
Two changes are most significant. First, the good news - the up front guaranty, currently at 3.5% will fall to 2.0%. Since the fee is most often rolled into the loan amount, this will decrease the loan amount. This fee was designed to partially cover the risk of 100% for the lender. The second change is the introduction of a 0.3% monthly insurance premium.
Up until now, there has been no monthly insurance payment for USDA mortgages. The 0.3% is an annual fee, so on a $100,000 mortgage, the amount would be $300 per year or $25 per month. Where this can affect a loan is in the debt to income (DTI). Since the additional insurance will be added to the monthly payment, it changes the ratio. For USDA loans the 29/41 ratio is most used. That mean that 29% of your gross income can be applied to your monthly mortgage payments, and 41% to overall debt including the mortgage, car loans, credit cards and so on. Adding the insurance could hurt a borrower who is just on the limit of the DTI.
If you have any questions about the changes, or USDA home loans, give Steve Jeppesen a call at 1-800-993-1947.
Two changes are most significant. First, the good news - the up front guaranty, currently at 3.5% will fall to 2.0%. Since the fee is most often rolled into the loan amount, this will decrease the loan amount. This fee was designed to partially cover the risk of 100% for the lender. The second change is the introduction of a 0.3% monthly insurance premium.
Up until now, there has been no monthly insurance payment for USDA mortgages. The 0.3% is an annual fee, so on a $100,000 mortgage, the amount would be $300 per year or $25 per month. Where this can affect a loan is in the debt to income (DTI). Since the additional insurance will be added to the monthly payment, it changes the ratio. For USDA loans the 29/41 ratio is most used. That mean that 29% of your gross income can be applied to your monthly mortgage payments, and 41% to overall debt including the mortgage, car loans, credit cards and so on. Adding the insurance could hurt a borrower who is just on the limit of the DTI.
If you have any questions about the changes, or USDA home loans, give Steve Jeppesen a call at 1-800-993-1947.
Many people find themselves in trouble when it comes to taking secured loan as they are often tempted to borrow more than you can afford on pay.
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