Mortgage Myth Busters: Shopping for mortgages in New Jersey – Are USDA loans the best? FHA loans?

Shopping for mortgages in New Jersey – Are USDA loans the best? FHA loans?

it can be confusing when shopping for mortgages

 

Shopping for mortgages can be frustrating. Especially when comparing mortgages that don’t fall into the same box. Example : Comparing FHA loans to USDA loans are not in the same box per se.  Adjustable rate mortgages would be considered in the same box. And with so many questions unanswered, especially if not asked, how does one know.

 

Lately I have been reading on how people sell specific mortgages, that try to compare mortgages, yet they leave out important specifics. Or attack in their comments saying that lenders make more money on a FHA loan than a conventional loan. In my opinion, there are two important issues that aren’t mentioned when reading other posts or articles that sell one mortgage program over the other.

 

 

Two important factors when comparing mortgage programs :

Profit margin – An unknown that most can assume, yet don’t know unless they sell mortgages. Even if they were once in the mortgage business 10 years ago, they can’t truly compare apples to apples. Each lender and loan officer usually has a specific profit margin, no matter what loan program they sell. Get out of your head what you hear on the streets or online, that FHA loans make more money. Yes, they could if not used in the borrowers favorite. But wait, this could be said for any type of mortgage out there. So the bottom line is that it doesn't matter what type of mortgage that I give you if my profit margin is the same across the board.

Apples to Apples – Just yesterday I read why FHA loans aren’t as good as USDA loans, and the main point was because FHA just raised its monthly mortgage insurance. You can make all the comparisons that you would want. But two things that were not mentioned, that USDA loans are area specific and income specific. Just like VA loans, to where you have to be a veteran.  Don’t get me wrong, all three types of mortgages are very good, and yes, both VA loans and USDA loans would be better than a FHA loan. Why?  Because you don’t have the monthly mortgage insurance that FHA loans have. Keep in mind though, one should not pick one loan over another just based on this kind of information. In my opinion, it comes down to the borrowers goals and a few other reasons. But one thing that is often left out when comparing such loans is a major fact, that USDA loans and VA loans aren’t allowed for everyone. FHA loans and conventional loans can be used for anyone that is buying a primary home or refinancing a primary home.

 

Conclusion : When shopping for a mortgage, one needs to be careful of how the author of that article is presenting the material. Anyone can make anything sound good in writing. One needs to know that someone talking about USDA loans might be targeting that key word for searches, and then sell you a FHA loan because you weren’t in the right area or because your income is to much. Yet it wasn't explained in the article. 

Even those rumors that float around at the water cooler, most of it is based on what they heard or what happened a year ago. The mortgage industry is ever changing and still changes weekly. You need to understand this. What I write about or look for, is someone that shares both the pros and cons when comparing mortgage programs.

 

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For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Comment balloon 6 commentsJeff Belonger • February 22 2011 09:07AM

Comments

Jeff,

I appreciate your commentary. If buyers are shopping around they may not realize some lenders have favorite (or familiar) mortage products and don't offer all.  Your balanced approach to choosing a loan product makes the borrower a winner every time.

Best,

Steve

Posted by Steve, Joel & Steve A. Chain (Chain Real Estate Investments & Mortgage, Steve & Joel Chain) almost 10 years ago

Jeff, good tips - and I may cut-n-paste part of your post and forward it to one of my buyers who does have lots of questions about comparing 'apples to apples'.

Thanks for sharing.

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) almost 10 years ago

 

STEVE... . One could easily say that my favorite is FHA loans, and even think that I don't do conventional loans, USDA loans, or VA loans. That would be far from the truth...just that conventional is some what cut and dry and you need an online approval... Anyhoo.. I just wanted to set the record straight and not that a specific loan is done just based on it's profit. it can be, but that is not how I operate. thanks

PRAFUL... .   my pleasure and thanks for the compliment. you can always cut and paste anything of mine, as long as I get credit or a link back. And I shared more details regarding USDA loans here. Understanding USDA loans  thanks

 

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) almost 10 years ago

Jeff, you are so right that we all need to be aware and know who the writer is on articles...  Unfortunately these a lot of junk online from so called experts...    I for one am sure glad we have YOU to pass along solid, good advice to us here in the rain! 
Pamela

Posted by Lee & Pamela St. Peter, Making Connections to Success in Real Estate (Berkshire Hathaway HomeServices YSU Realty: (919) 645-2522) almost 10 years ago

Good Post Jeff, I do like your apples to apples statement.  I was thinking you might provide a side by side comparison of FHA Vs USDA.   For someone promoting the USDA solely based upon the 3.5% Guarantee Fee Versus FHA MIP structure, It might appear to be a better option.   One part of this comparison is the fact that Generally the Rate of Interest on the USDA loan will very likely be higher than the FHA Option.  The important thing for consumers is that they need to speak with Lending Professionals that can help consumers understand the pros and cons of various loan types.

Posted by Tim Bradford, NMLS 250013 almost 10 years ago

Jeff - as usual...a GREAT post with easy to understand explanations.  I closed on my first USDA loan with a client last December and for her, it was a home run.  It really was the perfect loan for her situation but like you said, it is a location specific loan and lots of folks are not aware of that particular requirement.  In San Antonio and the surrounding areas where I spend most of my time selling homes the areas that qualify are a bit crazy.  Of course San Antonio doesn't qualify but when you move into the Schertz/Cibolo area it can get a little wacky.  Thanks again for the info and I hope you are having a great week!

Posted by Jeanna Martinez (RE/MAX Access) almost 10 years ago

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