Homebuyers received great news about the USDA Rural Development guaranteed loan program! In 2017, USDA drastically reduced the guarantee or funding fee they charge upfront on USDA loans, plus lowered the annual fee also. So the great news is that the USDA guarantee fee 2018 (also often referred to as a USDA funding fee) will remain at the low 1% financed amount! Additionally the annual fee will remain at .35% which is much lower than FHA’s standard 30 year rate of .85%. The USDA fiscal year stretches from October 1, 2017 – September 30, 2018, so these fees will be effective until 9/30/2018.
USDA Guarantee Fee 2018
First of all, what is a guarantee fee and why should you even care about it? Guarantee and funding fees are paid directly to lending agencies like VA, FHA, or in this case, USDA. Government loans like these require lenders to collect these fees at closing in order to use the programs. This guarantee fee actually helps pay for the lending agencies and programs to exist. Therefore the result is these great lending programs, which offer low to no down payments, are made available to borrowers.
Luckily for USDA buyers, the USDA guarantee fee 2018 is the lowest of the government loans (except disabled Veterans who are exempt from the VA funding fee). Additionally, the USDA guarantee fee is financed on top of the base loan amount. So the borrower doesn’t have to bring this fee to closing. Unless of course the buyer wants to. Overall, this means a lower payment and less money brought to the closing table!
USDA Annual Fee 2018
In addition to the upfront guarantee or funding fee, the USDA annual fee is also going to stay the same as 2017. This amount is .35% of the total loan amount. First of all, a common misconception is that this fee is collected once per year from the borrower. This is not the case. It just means that the monthly figure added to the payment is based on the new loan balance at each anniversary date times the .35% divided by 12 months.
USDA Annual Fee Calculation Example
|Base Loan Amt||$200,000|
|Total Loan Amt||$202,020|
So in the above example, the purchase price of $200,000 with borrowing the full price, the monthly figure added to the mortgage payment is $58.92. To calculate the full monthly mortgage payment, this annual fee is added to the principal, interest, insurance, and property tax monthly amounts. To figure USDA payment scenarios, we have a great USDA payment calculator on our site that you can use. We always welcome you to contact one of our loan officers too. Our USDA experts can help walk you through the USDA process including payments, costs, and more.
USDA No money down home loans are one of the best deals out there! Plus borrowers are not required to be a first time buyer, but you can be! USDA benefits include…
- 30 year fixed rates
- No money down required
- Seller may pay up to 6% of the purchase price towards buyer costs
- USDA streamline refinance available
- Liberal income requirements
- Lenient credit guidelines
So contact one of our loan officers to see if USDA or another mortgage product is right for you.