Changes to the USDA loans brought its fair share of confusion this past month. One common topic that seemed to bring in questions from IDS clients was the monthly Mortgage Insurance (MI). Unlike FHA loans, where the MI is paid monthly, USDA loans have an annual payment for MI. The Lender/Investor collects monthly disbursements and then makes an annual payment to USDA when it is due. The MI is not being paid out monthly; a cushion is highly recommended and required for some investors. Investors create this cushion to automatically reassure that the borrower is not short funds when the annual MI is due at the end of the year.
If you need help or have questions regarding the changes to the USDA loans contact the IDS compliance department or any of your IDS representatives.