Loans By Kathy: USDA Loan Program Changes October 1, 2011

USDA Loan Program Changes October 1, 2011

The USDA loan program changes will be effective on October 1, 2011.  What changes, you ask?  Well, USDA is changing the "mortgage insurance" piece of the financing.  As of now, there is a funding fee that is financed into the loan amount and there is no monthly mortgage premium.


As of October 1, this will change to mirror the FHA mortgage insurance premium structure where part of it is financed and the second part is a monthly charge.  There has been talk for a long time about making this change, now that it is here, the following table demonstrates the changes to the consumer.  In this example, I did not include the taxes or hazard insurance portion of the payment since they are not related to the changes.  I also made one more assumption in that all were calculated at 4.5% interest, amortized over 30 years.



USDA –Current

USDA - Proposed

FHA 203 (b)

Loan Amount








Financed MIP




Total Financed 4.5%








P & I




Monthly MIP

$ 0

$  24.82

$  95.83










The USDA loan or Rural Development loan can be used only for a primary residence and must be in a qualifying area.  In addition, there are income restirctions that apply as well.  The biggest advantage is that this is a 100% loan and a great option for first time home buyers that are struggling to save their down payment.


For more information regarding the USDA loan and your specific situation, please give me a call.



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Kathy Sheehan Senior Loan Officer






Bay Equity LLC

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The opinions and general information in this blog are soley those of Kathy Sheehan.  Specifics regarding an individual case should be discussed in detail with a loan professional.  For a confidential consultation, please feel free to contact me via phone or email.  All terms and conditions are subject to change.


Comment balloon 0 commentsKathy Sheehan • September 01 2011 01:46PM