USDA loan vs Credit union no PMI

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My son (30k salaried) is trying to purchase his first home in a USDA area. He has very little down payment $ so I want to gift him $ if necessary. Credit score pulled middle number from broker 694 but she says he is not qualified for the USDA mortgage because he only has two lines on his credit and they are not both over 24months old (1 is) so she says must go FHA with lifetime PMI with gift down pymt at 4.25. The local state emp. credit union has a 2yr arm 100% no PMI at 4.75 with 1% cap every 2yrs. Any advise? With an accountant degree he is not too keen on paying 80-100 PMI every month.


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The Credit Union loan might be a good stopgap, although only a temporary one. Certainly preferable to FHA, most anything is these days. One alternative to consider would be the Fannie Mae 95% or 97% loan. In both cases, you could gift him the down payment (going to a Fannie Direct lender). There would be PMI, but the rate would be fixed, and likely lower than the 2 year ARM the credit union is offering.

Answered about 1 year ago
Ted Rood
1312 6

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