Go Back   AnandTech Forums > Social > Off Topic

Forums
· Hardware and Technology
· CPUs and Overclocking
· Motherboards
· Video Cards and Graphics
· Memory and Storage
· Power Supplies
· Cases & Cooling
· SFF, Notebooks, Pre-Built/Barebones PCs
· Networking
· Peripherals
· General Hardware
· Highly Technical
· Computer Help
· Home Theater PCs
· Consumer Electronics
· Digital and Video Cameras
· Mobile Devices & Gadgets
· Audio/Video & Home Theater
· Software
· Software for Windows
· All Things Apple
· *nix Software
· Operating Systems
· Programming
· PC Gaming
· Console Gaming
· Distributed Computing
· Security
· Social
· Off Topic
· Politics and News
· Discussion Club
· Love and Relationships
· The Garage
· Health and Fitness
· Merchandise and Shopping
· For Sale/Trade
· Hot Deals with Free Stuff/Contests
· Black Friday 2014
· Forum Issues
· Technical Forum Issues
· Personal Forum Issues
· Suggestion Box
· Moderator Resources
· Moderator Discussions
   

Reply
 
Thread Tools
Old 03-17-2011, 01:05 PM   #1
Pablo
Junior Member
 
Join Date: Oct 1999
Posts: 13
Default Mortgage Question: USDA vs Conventional

I am about to purchase a home, and I have 20% down.

First the facts:
Purchase price on home: $205,000 (3% closing costs paid for)
Down payment: $41,000

Due to my (lack of) substantial credit history, I don't qualify for best rate for conventional.

Here's my options:
USDA: Finance just under $170,000 (USDA loans have a funding fee)
Rate is 4.75% (30 year)

Conventional: Finance $164,000
Rate is 5.125% (30 year)

Payments are within $10 of each other. I'm leaning towards the conventional, but for some reason the guy pitching the USDA is saying I will be saving money when I go to sell the house in 10 years. I can't make that math work.

Any help?

Pablo
Pablo is offline   Reply With Quote
Old 03-17-2011, 01:09 PM   #2
OCGuy
Lifer
 
OCGuy's Avatar
 
Join Date: Jul 2000
Location: CA
Posts: 27,156
Default

I would not finance a 3.5% funding fee into the loan, which is what USDA charges.

5.125 at todays rates, he is making some serious back-end rebate if you have anything over a 680 middle FICO. He could possibly make more money on the back end at 4.75 on the USDA loans.

If you are planning on keeping the loan for 30 years, the lower rate keeping more money in your pocket (USDA) would be the better choice though.
__________________
4670k @ 4.2
MSI Gaming GTX770 @ 1246/7500
OCGuy is offline   Reply With Quote
Old 03-17-2011, 01:10 PM   #3
oldsmoboat
Elite Member
 
oldsmoboat's Avatar
 
Join Date: Mar 2000
Location: Kaliforniastan
Posts: 46,555
Default

USDA?
__________________
It's not the odds that guide me, it's the stakes.
oldsmoboat is online now   Reply With Quote
Old 03-17-2011, 01:10 PM   #4
Patranus
Diamond Member
 
Patranus's Avatar
 
Join Date: Apr 2007
Posts: 9,240
Default

Why is the USDA giving out mortgages?

(No wonder this country is broke)
Patranus is offline   Reply With Quote
Old 03-17-2011, 01:11 PM   #5
Pablo
Junior Member
 
Join Date: Oct 1999
Posts: 13
Default

Quote:
Originally Posted by OCGuy View Post
I would not finance a 3.5% funding fee into the loan, which is what USDA charges.

5.125 at todays rates, he is making some serious back-end rebate if you have anything over a 680 middle FICO. He could possibly make more money on the back end at 4.75 on the USDA loans.
I'm in the 660 range. The loans are being pitched by two different people. Broker is pitching USDA, bank is pitching conventional.
Pablo is offline   Reply With Quote
Old 03-17-2011, 01:11 PM   #6
Pablo
Junior Member
 
Join Date: Oct 1999
Posts: 13
Default

Quote:
Originally Posted by Patranus View Post
Why is the USDA giving out mortgages?

(No wonder this country is broke)
I asked myself the same thing. Promoting Urban Sprawl?
Pablo is offline   Reply With Quote
Old 03-17-2011, 01:13 PM   #7
Cal166
Diamond Member
 
Cal166's Avatar
 
Join Date: May 2000
Location: New York
Posts: 4,971
Default

Quote:
Originally Posted by oldsmoboat View Post
USDA?
The Government is reallocating resources around, like ICE and DHS shutting down the internet?
__________________
[b]EX FS/FT Moderator at Hardforums

Heatware

Marry her. Everybody needs a first ex-wife. -Crazyfool
Cal166 is offline   Reply With Quote
Old 03-17-2011, 01:13 PM   #8
OCGuy
Lifer
 
OCGuy's Avatar
 
Join Date: Jul 2000
Location: CA
Posts: 27,156
Default

What state might I ask?
__________________
4670k @ 4.2
MSI Gaming GTX770 @ 1246/7500
OCGuy is offline   Reply With Quote
Old 03-17-2011, 01:14 PM   #9
oldsmoboat
Elite Member
 
oldsmoboat's Avatar
 
Join Date: Mar 2000
Location: Kaliforniastan
Posts: 46,555
Default

Quote:
Originally Posted by OCGuy View Post
What state might I ask?
Me? State of Confusion. USDA?
__________________
It's not the odds that guide me, it's the stakes.
oldsmoboat is online now   Reply With Quote
Old 03-17-2011, 01:15 PM   #10
Pablo
Junior Member
 
Join Date: Oct 1999
Posts: 13
Default

Quote:
Originally Posted by OCGuy View Post
What state might I ask?
SC
Pablo is offline   Reply With Quote
Old 03-17-2011, 01:15 PM   #11
JS80
Lifer
 
JS80's Avatar
 
Join Date: Oct 2005
Posts: 26,285
Default

Quote:
Originally Posted by oldsmoboat View Post
USDA?
Bulk prime mortgages?
__________________
Quote:
Originally Posted by BoberFett View Post
95% of what Craig says is stupid. The other 5% is REALLY stupid.
JS80 is offline   Reply With Quote
Old 03-17-2011, 01:16 PM   #12
OCGuy
Lifer
 
OCGuy's Avatar
 
Join Date: Jul 2000
Location: CA
Posts: 27,156
Default

Quote:
Originally Posted by oldsmoboat View Post
Me? State of Confusion. USDA?
They provide loans in "rural" areas that allow less than 20% down with no mortgage insurance at good rates.
__________________
4670k @ 4.2
MSI Gaming GTX770 @ 1246/7500
OCGuy is offline   Reply With Quote
Old 03-17-2011, 01:16 PM   #13
BoomerD
Lifer
 
BoomerD's Avatar
 
Join Date: Feb 2006
Location: Where I hang my hat.
Posts: 45,028
Default

Quote:
Originally Posted by Patranus View Post
Why is the USDA giving out mortgages?

(No wonder this country is broke)
http://www.rurdev.usda.gov/rhs/

http://www.amerisave.com/usda-loans

"USDA home loans are offered in rural areas as determined by the United States Department of Agriculture (USDA). The USDA’s mission is to help lower income households obtain home loans at reasonable mortgage rates. USDA home loans offer many advantages to qualified borrowers.

USDA mortgage loans allow for purchase and no cash out refinances of primary residences (that already have USDA financing). Some benefits of USDA are:

* 100% financing
* No monthly mortgage insurance
* No asset or automatic reserve requirements with an automated underwriting approval.
* Gifts allowed for closing costs

Eligible USDA property types are single family homes and condominiums. USDA does have some income and property eligibility requirements.

Even though a mortgage insurance premium is not required, USDA charges a 3.5% funding fee to guarantee the mortgage. This fee may be financed into the loan amount."
BoomerD is online now   Reply With Quote
Old 03-17-2011, 01:17 PM   #14
oldsmoboat
Elite Member
 
oldsmoboat's Avatar
 
Join Date: Mar 2000
Location: Kaliforniastan
Posts: 46,555
Default

http://www.usdaloanapproval.com/
__________________
It's not the odds that guide me, it's the stakes.
oldsmoboat is online now   Reply With Quote
Old 03-17-2011, 01:23 PM   #15
Pablo
Junior Member
 
Join Date: Oct 1999
Posts: 13
Default

Quote:
Originally Posted by OCGuy View Post
I would not finance a 3.5% funding fee into the loan, which is what USDA charges.

5.125 at todays rates, he is making some serious back-end rebate if you have anything over a 680 middle FICO. He could possibly make more money on the back end at 4.75 on the USDA loans.

If you are planning on keeping the loan for 30 years, the lower rate keeping more money in your pocket (USDA) would be the better choice though.
Planning on only keeping it 7-10 years. Would conventional be better? I'm calculating it would be, but just wanting a third opinion.

If the numbers I am running are correct, I'm better off with the conventional until month 314.
Pablo is offline   Reply With Quote
Old 03-17-2011, 01:55 PM   #16
BoberFett
Lifer
 
BoberFett's Avatar
 
Join Date: Oct 1999
Location: Minneapolis
Posts: 33,645
Default

Quote:
Originally Posted by JS80 View Post
Bulk prime mortgages?
Alternator sized?
__________________
"You had me at Meat Tornado." -- "I was born ready. I'm Ron f***ing Swanson."
BoberFett is offline   Reply With Quote
Old 03-17-2011, 02:11 PM   #17
nanobreath
Senior Member
 
Join Date: May 2008
Posts: 978
Default

Quote:
Originally Posted by Pablo View Post
Planning on only keeping it 7-10 years. Would conventional be better? I'm calculating it would be, but just wanting a third opinion.

If the numbers I am running are correct, I'm better off with the conventional until month 314.
Trust your numbers. He is probably pushing the USDA loan harder because he makes a good commission off of it, especially since the other loan you are considering isn't through him. He wants to make money. The only way the USDA loan would be better is if you planned on staying in the house for the entire life of the loan without paying it off early.
nanobreath is offline   Reply With Quote
Old 03-17-2011, 02:14 PM   #18
darkxshade
Lifer
 
Join Date: Mar 2001
Location: Podunk
Posts: 13,752
Default

I get mine from the DOD.
__________________
Don't argue with an idiot, first they'll bring you down to their level, then beat you with experience.
darkxshade is offline   Reply With Quote
Old 03-17-2011, 02:18 PM   #19
MikeMike
Lifer
 
MikeMike's Avatar
 
Join Date: Feb 2000
Posts: 45,676
Default

Quote:
Originally Posted by Pablo View Post
I am about to purchase a home, and I have 20% down.

First the facts:
Purchase price on home: $205,000 (3% closing costs paid for)
Down payment: $41,000

Due to my (lack of) substantial credit history, I don't qualify for best rate for conventional.

Here's my options:
USDA: Finance just under $170,000 (USDA loans have a funding fee)
Rate is 4.75% (30 year)

Conventional: Finance $164,000
Rate is 5.125% (30 year)

Payments are within $10 of each other. I'm leaning towards the conventional, but for some reason the guy pitching the USDA is saying I will be saving money when I go to sell the house in 10 years. I can't make that math work.

Any help?

Pablo
Mwahahaha, I caught the lurker!!!
MikeMike is offline   Reply With Quote
Old 03-17-2011, 02:38 PM   #20
nanobreath
Senior Member
 
Join Date: May 2008
Posts: 978
Default

Quote:
Originally Posted by MikeMike View Post
Mwahahaha, I caught the lurker!!!

Holy shit, I didn't even notice. That is some epic lurking.
nanobreath is offline   Reply With Quote
Old 03-17-2011, 02:41 PM   #21
MikeMike
Lifer
 
MikeMike's Avatar
 
Join Date: Feb 2000
Posts: 45,676
Default

Quote:
Originally Posted by nanobreath View Post
Holy shit, I didn't even notice. That is some epic lurking.
he had made FIVE posts prior to that one...
MikeMike is offline   Reply With Quote
Old 03-17-2011, 02:42 PM   #22
edro
Lifer
 
edro's Avatar
 
Join Date: Apr 2002
Location: Columbus of Ohio
Posts: 22,229
Default

I tried to get a USDA loan, but as soon as I applied they said there weren't enough funds for USDA loans at that time.

That was 6 months ago.
edro is offline   Reply With Quote
Old 03-17-2011, 02:45 PM   #23
darkxshade
Lifer
 
Join Date: Mar 2001
Location: Podunk
Posts: 13,752
Default

Quote:
Originally Posted by MikeMike View Post
he had made FIVE posts prior to that one...

Holy hell... If he's willing to double his post count just to ask a question, it must be realllly imporant. I think he deserves only straight answers. No messin around.
__________________
Don't argue with an idiot, first they'll bring you down to their level, then beat you with experience.
darkxshade is offline   Reply With Quote
Old 03-17-2011, 02:52 PM   #24
brandonb
Diamond Member
 
Join Date: Oct 2006
Posts: 3,495
Default

I have a USDA loan. I took it because you pay your PMI up front rather than over the life of the loan.

$100 a month x 12 month x 30 years = $36000
A $200000 house at 3.5 = $7000.

Not that it matters if you have a 20% down payment, I believe with 20% you can get out of the PMI. So you'd be better off with the conventional. And the above figure would be $0 for you.

But I believe what the guy is trying to tell you is this: With how the principle vs interest is paid off on houses, with a lowest interest rate, you'd be paying more off on the USDA loan per month off the principle, so in 10 years, you'd have paid off more of the house so therefore more money in your pocket. It might make up more than the difference of the USDA funds up front. But you'd have to do the math on the interest rate to find out for sure.
__________________
Computer Setup
Intel Ivy Bridge 3550, AsRock Z75 Pro3, 8 gig GSkill 1600 8-8-8-24 timing, Crucial m4 64gig, 500meg WD RE4, ATI 7970 3GB, LG IPS236V x 3, Windows 8, Antec Sonata Solo 2, Antec 550watt PS.
brandonb is offline   Reply With Quote
Old 03-17-2011, 03:58 PM   #25
josh0099
Senior Member
 
josh0099's Avatar
 
Join Date: Aug 2004
Posts: 542
Default

If USDA lets you put less then 20%, why not take advantage of that and keep some of your money on the down payment and finance a bit of it to keep an emergency fund/invest money else where, since you aren't planning on paying off the mortgage as you want to sell within 10 years. Also since your mortgage interest is going to be tax deductible you should be able to make the difference up with other investments or have the flexibility if something bad does happen to keep your loan payments up from that fund. aka do 10% instead of 20%?
__________________
Moo
josh0099 is offline   Reply With Quote
Reply

Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump


All times are GMT -5. The time now is 06:54 PM.


Powered by vBulletin® Version 3.8.7
Copyright ©2000 - 2014, vBulletin Solutions, Inc.