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Understanding the Differences Between USDA and VA Loans in Florida, Texas, Tennessee, and Alabama

April 21st, 2023 by Sean Stephens

What are three differences between USDA and VA loans in Florida, Texas, Tennessee, or Alabama?Understanding the Differences Between USDA and VA Loans: Which One is Right for You?

If you’re in the market for a mortgage in Florida, Texas, Tennessee, or Alabama, you may have come across different types of loans, including USDA and VA 100% financing options.

While USDA and VA loans are both fantastic no down payment financing options, they also have their own unique features and eligibility requirements. In today’s blog post, we will break down and review the key differences between USDA and VA loans to help you make an informed decision.

Additionally, to help you stay organized with the key differences between programs, we’ve created a FREE Loan Comparison Chart for you to download. It compares USDA, VA, FHA, and Conventional loan programs side-by-side and best of all, it is contained in one simple chart!. Download it now!

Understanding the Differences Between USDA and VA Loans in Florida, Texas, Tennessee, and Alabama

USDA and VA Loans Basics

USDA loans, also known as Rural Development loans, are backed by the United States Department of Agriculture (“USDA”) and are designed to help low-to-moderate income homebuyers in rural areas purchase a home.

VA loans, are backed by the Department of Veterans Affairs and are available to eligible veterans, active-duty military personnel, and certain eligible surviving spouses.

No Down Payment – USDA and VA Loans

As many of us know, both USDA and VA home loans both allow for no down payment. They are also both known for their flexible credit qualifying, manual underwriting availability, and shortened time frames for qualifying after recent bankruptcies, foreclosures, and short sales.

Now that we have reviewed some of their basic similarities, what are the key differences between USDA and VA loans?

1. Eligibility Requirements

USDA and VA eligibility in Florida, Texas, Tennessee, or Alabama

Both USDA and VA home loans are very specific when it comes to eligibility. Plus, they are very different from FHA and Conventional loan qualifying guidelines.

USDA guidelines specify that applicants must meet household income limits as outlined per county. Additionally, the property must also be located in a USDA eligible area.

On the other hand, VA loans are only available to eligible military service members and in some cases surviving spouses.

2. Maximum Loan Amount

The fact that there is NO maximum USDA loan amount is one of the best kept secrets of the USDA loan program.  The USDA maximum loan amount is calculated based on the applicant’s ability to qualify.

For a VA mortgage, the basic entitlement for each eligible Veteran is $36,000  which allows for loan amounts up to $144,000.  However, for those loan amounts above $144,00 a veteran may utilize what is called additional or “bonus entitlement” which allows them to increase loan amounts above $144,000.

Additionally, under the Blue Water Navy Vietnam Veterans Act of 2019 this has helped to expand maximum guaranty amounts under the VA program.  We understand that the calculation of the VA entitlement and maximum loan amounts may be complicated, so please just call my office with any questions at 800-806-9836 Ext. 280.

3. Do USDA or VA loans have Mortgage Insurance?

While USDA loans do not require private mortgage insurance (PMI), they do have an annual fee. The annual fee is calculated on a monthly basis and included with your mortgage payment. Also, USDA Loans require a 1% Guarantee fee which is a one-time charge collected at closing that may be financed into the loan.

VA loans, on the other hand, do not have PMI or an annual fee. Instead, a VA mortgage does involve the calculation of the VA Funding Fee.

The VA Funding Fee was recently reduced and ranges anywhere from 0% to 3.3% and is calculated based on the type of service, previous usage, purchase or refinance, and any down payment. This is a one-time cost that is collected at closing and may be financed into the loan.

There are times when the funding fee is waived. You will not have to pay a funding fee if any of the following apply to your situation:

  • You’re receiving VA compensation for a service-connected disability, or
  • You’re eligible to receive VA compensation for a service-connected disability, but you’re receiving retirement or active-duty pay instead, or
  • You’re receiving Dependency and Indemnity Compensation (DIC) as the surviving spouse of a Veteran, or
  • You’re a service member who has received a proposed or memorandum rating before the loan closing date that says you’re eligible to get compensation because of a pre-discharge claim, or
  • You’re a service member on active duty who, before or on the loan closing date, provides evidence of having received the Purple Heart surviving spouse of a Veteran who meets certain eligibility requirements.

Benefits of working with a USDA and VA Approved Lender

Metroplex Mortgage Services is an approved USDA and VA lender in Florida, Texas, Tennessee, and Alabama. As a result, we take immense pride in serving both our rural and military communities.

USDA and VA approved lender in Tampa Florida, Texas, Tennessee, or Alabama

We work hard to have specific loan systems in place that help our customers walk through the qualification process which allows our team to assist with important items like…

  • VA Certificate of Eligibility;
  • Calculating the VA entitlement;
  • Reviewing eligible USDA areas and property types;
  • Determining USDA income eligibility; and
  • Upfront review for those who are self-employed!

Remember, let our experience be a resource for you! Whether it be USDA, VA, FHA, or Conventional, simply call or email to discuss your scenario and let us show you the “Metroplex” difference!

(800) 806-9836 Ext. 280
SeanS@MPLX.org

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