What would be the difference between USDA loan vs a VA loan?
- The USDA loan and the VA loan are similar in that they are both zero down payment loans but the difference is in how they are underwritten, and the guidelines for each.
- The VA loan has:
- No credit score requirement
- No income caps
- an be used in any geographical area
- The USDA loan, however
- Has a minimum credit score of 620.
- Income eligibility is based on the income of all adults in the home over the age of 18
- Is only available in USDA eligible areas (rural)
- In some cases, you can roll closing costs into the loan amount
- Cannot purchase a two-unit property
- Cannot purchase an income producing property
- Additionally, these loans are underwritten very differently. The USDA loan has two levels of underwriting, one that is traditional, and the other that is underwritten directly through the USDA.
- Both are great loan programs however, if you were eligible for VA, it would be the preferred an easier method to obtain home Loan.
- USDA Is also a government backed loan but has more restrictions than a VA loan. One of them being income restrictions.
- The actual interest rate is usually similar to the VA loan however, USDA loans have mortgage insurance. Overall, you will save money going with a VA loan
- VA is an earned right that offers 100% financing to those who qualify without consideration for location or income limitations. VA allows for lower credit scores, more concessions, higher debt to income ratios.
- USDA is also a 100% loan and will actually allow you to increase your loan amount to cover some or all of your closing costs depending on the appraised value. USDA has extremely strict guidelines about income, debt to income ratios, credit history and property location.