USDA Home Loans have PMI?

USDA loans are the coolest loans on the planet right now, and most people don’t understand that it has a form of mortgage insurance…

Mortgage Insurance does not pay your mortgage off when you die (well, maybe there’s a kind that does, but that’s not what I’m talking about).  The PMI-type mortgage insurance is default insurance. It covers a small portion to the bank if you default on the loan.

With Conventional loans, it’s referred to as Private Mortgage Insurance, or PMI.  This insurance generally cost @ .58%of the loan amount on a monthly basis (assuming you have 10% to put down and really good credit scores).

FHA has Mortgage Insurance Premium, or MIP, which is 2.25% of the loan amount PLUS a monthly amount of .90% of the loan amount (think it’s kinda’ expensive?).

VA has a Guarantee Fee. So if you are Veteran using your VA benefits the fee could be as much as 3%! (For details click here).

USDA Home Loans also have a form of default insurance (PMI), and it’s a Guarantee Fee. The actual dollar amount is a rather complicated formula, and it ends up being about 3.5% – but most people use 3.5% as a rule of thumb for prequalifying purposes. (updated 5.27.2010 from 2% which is what they charged earlier)  USDA Home Loans are AFFORDABLE!

Note that starting October 1, 2011 USDA Home Loan will change it’s PMI calculations.  Starting in October – there will be a 1% upfront fee and a MONTHLY CHARGE!

If you want more information about  USDA Home Loans in NC – please call Steve and Eleanor Thorne, 919-649-5058.  We are Mortgage Lenders in the Triangle that specialize in these types of mortgage loans.  Ask us about your Tax Credit! We have the lowest rates!

Comments

  1. After the Typhoon Katrina incident, we always make sure that our home is always insured that is why we always get premium home insurance. `,`

  2. linda pruitt says:

    when can i get out of paying the pmi insurance.

    • Per FHA’s Mortgagee letter of 2000-38, Mortgages Endorsed after January 1, 2001 can have their annual insurance premium (that FHA PMI you are paying each month) dropped off. FHA does NOT make the call – the Bank you are making your payments to decide – however, the exact “guidance” from FHA says: “Cancellation of the annual mortgage insurance premium after the loan amount is reduced to 78% or less of the property value (based on the lower of the sales price or appraised value at origination)” This is pretty significant. It’s saying that you don’t have to reach 78% of TODAY’s Value – only 78% of the ORIGINAL appraised value or Sales Price! Good Luck!

    • Linda – I just noticed you were asking about when you could get the PMI (that you pay monthly) on a USDA Home Loan taken off. That is charged for the life of the loan. It adjusts Annually. So year one (as an example) your balance is $100K. You take the $100,000 mulitply by .3% then divide by 12 – that’s what you are charged monthly. The next year, you’ve made payments, and you might only owe $97K – that’s the number that the .3% is based upon

  3. After I initially left a comment I seem to have clicked on the -Notify me when new comments are added-
    checkbox and now each time a comment is added I receive four emails with the exact same comment.
    There has to be a way you can remove me from that service?
    Thanks!

Speak Your Mind

*