What are three important differences between USDA and VA loans?
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 short video, I will break down and review three important differences between USDA and VA loans.
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!
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 covered some of their basic similarities, let’s review three important differences between USDA and VA mortgages.
1. Eligibility Requirements
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. “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 a PMI or an annual fee. Instead, a VA mortgage requires a VA Funding Fee.
The VA Funding Fee ranges anywhere from 0% to 3.6% 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. This is for certain Veterans that have a service-connected disability and for the 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 and as a result, we take immense pride in serving both our rural and military communities.
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