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Old 02-17-2010, 08:25 AM
 
Location: Columbiana, OH
21 posts, read 150,777 times
Reputation: 36

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So I'm in the process of buying a home.. and a little confused about the USDA loan thing.. if anyone could help with my questions that would be great! I feel like mortgage lenders are always going to tell you what you want to hear.. so I'd rather hear it from people that gain nothing by my choice

First, what is the biggest con with a USDA loan? (Our location is already approved to be eligible for the loan, so besides that)

What percent goes to the principal each month and what percent is going to interest? (You know, I don't want to pay the first 5 years of interest only and not even touch the principal..)

We are getting an interest rate of 5.00%... is this good?

I read somewhere that the payments are calculated by your income... WHAT? How does that work.. or is that really how it works?


And... any other info on this type of loan you want to throw my way would be wonderful This is my first house.. so I can use all the help I can get! Thank you!!!!!
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Old 02-17-2010, 09:06 AM
 
Location: Salem, OR
14,595 posts, read 35,131,723 times
Reputation: 14190
The biggest cons for the USDA are the location requirements and the tight standards that they have. Often homes don't qualify for their financing due to condition issues.

You can look at any amortization table and see how much goes to principal and interest and YES during the first 5 years you aren't paying a lot in principal. It isn't zero, but you pay more interest than principal. This is true for ALL loans.

Yes a 5% rate is good.

Payments aren't calculated by your income but what you can afford is calculated by your income. There is something called the Debt to Income Ratio and they use that ratio to figure out what kind of monthly payments you can afford and hence how much house you can buy. USDA loans have a maximum income limit in order to qualify for their loan. You sound like you are mixing facts together and a bit confused.
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Old 02-17-2010, 01:13 PM
 
182 posts, read 806,233 times
Reputation: 86
The "closing costs" will also be higher with this type of loan according to what lender you use. There is an automatic 2% charged up front by the USDA for the guaranteeing of the loan. This will be in addition to loan origination fees, etc. from your lender. I purchased a home in Nov. using a USDA loan. That 2% up front is what enables you to have this loan without paying PMI each month so in my mind it was a better deal than an FHA loan which would have PMI. And yes like silverfall said your first few years will be pretty disheartening when you look at how much is going to principal v interest.
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Old 07-28-2011, 07:27 AM
 
2 posts, read 5,474 times
Reputation: 13
I had been approved and so had the location. But, when the appraisal came in, the barn and acreage disqualified it because it looked like a "farm." I told them I have 1 horse who's a pet. But, they wouldn't budge because the barn is a "farm service bldg."
I got approved for FHA so that's where I'm going.
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