Friday, March 22, 2013

KENTUCKY GUARANTEE FEES AND LOAN NOTE GUARANTEE


KENTUCKY GUARANTEE FEES AND LOAN NOTE GUARANTEE 

Upfront Guarantee Fee
 The lender must remit an upfront non-refundable guarantee fee at loan closing. The 
upfront guarantee fee may be charged to the applicant and/or included in the loan. 
Annual Fee
 An annual fee is applicable for the life of the loan. 
 The fee will be calculated on the scheduled unpaid average principal balance, divided into 
12 monthly payments and added to the monthly mortgage payment.
 Servicing lenders must remit annual fees electronically via pay.gov once established. 
 A pro-rated annual fee will be determined for loans that are paid off, terminated, or result in 
a loss. 

Loan Note Guarantee
 In the event of a borrower default, Rural Development will guarantee up to 90
percent of the original loan amount as follows: 100 percent of the loss is covered for the 
first 35 percent of the loan amount. Losses greater than 35 percent are guaranteed at 85 
percent of the loss for the remaining 65 percent of the loan amount. 
Fiscal Year (FY) 2013 Guarantee Fees: FY 2013: October 1, 2012 – September 30, 2013
Purchase Transactions: 
 Upfront Guarantee Fee: 2% 
 Annual Fee: .40% USDA Rural Development Single Family Housing Guaranteed Loan Division October 2012
1400 Independence Ave., S.W. Washington D.C. 20250-0784
202.720.1452

Refinance Transactions: 
 Upfront Guarantee Fee: 2% 
 Annual Fee: .40% 
Calculating the upfront guarantee fee and annual fee: 
An “Upfront Guarantee Fee and Annual Fee Calculator” is available on the USDA LINC website under 
the “Training and Resource Library” link. Refer to the “Rural Development Contacts” section for 
more information. 

PURCHASE TRANSACTIONS

Purchase Scenario #1: Finance the entire upfront guarantee fee
Appraised value: $150,000 | Purchase price: $147,000 | Closing costs included: $3,000
$147,000 + $3,000 = $150,000 ÷ .98= $153,061.22 total loan amount including the 2% fee
$153,061.22 x 2% = $3,061.22 upfront guarantee fee 
Purchase Scenario #1: Annual Fee 
Average UPB $151,938.66 x .40% = $607.75 1st year annual fee 
$607.75 ÷ 12 = $50.65 added to monthly mortgage payment
Purchase Scenario #2: Do not finance the upfront guarantee fee
$147,000 + $3,000 = $150,000 total loan amount 
$150,000 x 2% = $3,000 guarantee fee will be due at the closing table
Purchase Scenario #2: Annual Fee
Average UPB $148,899.90 x .40% = $595.60
$595.60 ÷ 12 = $49.63 added to monthly mortgage payment
REFINANCE TRANSACTION 
Refinance Scenario #1: Finance the entire upfront guarantee fee
$147,500 principal balance ÷ .98 = $150,510.20 total loan amount including the 2% fee
$150,510.20 x 2% = $3,010.20 guarantee fee 
Refinance Scenario #1: Annual Fee
Average UPB $148,899.90 x .40% = $595.60
$595.60 ÷ 12 = $49.63 added to monthly mortgage payment
Refinance Scenario #2: Do not finance the upfront guarantee fee
$147,500 principal balance x 2% = $2,250 guarantee fee will be due at the closing table
Refinance Scenario #2: Annual Fee
Average UPB $146,418.25 x .40% = $585.67
$585.67 ÷ 12 = $48.81 added to monthly payment
For refinance transactions: If any additional closing costs, fees, etc. will be financed in addition to 
the principal loan amount; a new appraisal will be required. The total loan amount before the 
guarantee fee is calculated may not exceed the appraised value