FHA vs USDA Loan – Total Cost Of Ownership (Updated 4/2012)

by Brian Mayer on October 11, 2010

USDA Loan vs FHA Loan

Total Cost Of Ownership

***UPDATED FOR APRIL 2012 FHA CHANGES***
Assuming the following -

  • $300k purchase price and 300k appraised value
  • 4% fixed interest rate on a 30 year fixed loan
  • Home is located in an USDA Eligible Area
Loan Type

Down Payment

Monthly Mortgage Insurance

Location Restrictions

Income Limits

Loan Limits

Minimum Credit Score

Loan Types

Up Front Mortgage Insurance

USDA 

0%$

.0.3%

Yes

Yes

417k

620*

Only 30yr Fixed

2%

FHA 

3.5%

1.25%

No

No

Location Specific

620*

Too many to list…

1.75%

* Minimum credit scores are set by the lender

Length- 30yr | Rate- Fixed 4%

Up-Front Mortgage Insurance

Down Payment

Total Loan Amount Financed

Monthly Mortgage Insurance

Monthly Payment
– Principal + Interest + MIP

Amount paid in monthly payments after five years

Total $$$ spent after five years

Amount owed after five years

USDA

$6,000

$0

$306,133

$76.50

$1538

$92,280

$92.280

$276,890

FHA

$5,250

$10,500

$294,566

$306.84

$1,713

$102,480

$113,280

$266,428

USDA – total of $92,280 out of pocket over five years and still owe $276,890. If the house sold for net 300k you would profit $23,110

Subtract the profit $23,310 from the expense $92,280

Total Cost Of Ownership Is = $68,970

FHA- total of $113,280 total out of pocket over five years and still owe $266,428. If

usda vs fha loan

FHA vs USDA loan

the house sold for net 300k you would profit $33,572

Subtract profit $33,572 from the expense $113,280

Total Cost Of Ownership Is = $79,708

Difference – USDA Loan is about $10,738 cheaper after five years

That might not seem like a ton of money however considering you save $175 per month and the fact that you dont have to come up with 10k+ for down payment + closing costs, it makes USDA a clear winner over FHA.

If you are considering getting a USDA loan or just have questions, call the USDA Loan expert Brian Mayer at 443-624-9398 or email me at Brian@MyMarylandLender.com

 

 

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