On October 1st, the USDA is making drastic cuts to feesThe USDA mortgage requires two types of fees: an upfront guarantee fee and a monthly fee. They are both being reduced, allowing more buyers to qualify.
Starting on October 1, 2016, the upfront fee will be reduced.
Current upfront fee: 2.75%
New upfront fee: 1.00%
and the monthly fee will also drop.
Current annual fee: 0.50%
New annual fee: 0.35%
The term “guarantee” simply refers to USDA’s loan backing that allows lenders to issue loans according to its guidelines. The current upfront guarantee fee stands at 2.75 percent of the loan amount and is seeing a drastic cut to 1.00 percent, and the "annual fee" is currently 0.50 percent also dropping significantly to 0.35%, paid in twelve equal installments and included in each mortgage payment.
The changes will be in effect until September 30, 2017. Typically, USDA re-examines financials of previous fee changes then raises, holds, or reduces fees accordingly. If loans in USDA's portfolio perform well, another drop could come in 2017.
But the 2016 reductions alone equal big savings for USDA home buyers.
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USDA slashing mortgage fees: Borrowers who use the U.S. Department of Agriculture’s Rural Housing Service to get a mortgage could soon pay significantly less for their loan, as the USDA announced that it is about to cut its loan fees for lenders who use the Single Family Housing Loan Guarantee Program. Here are all the details.
According to the announcement, the USDA is set to cut its upfront guarantee fee from 2.75% of the loan-at-close amount to 1%. Additionally, the USDA is cutting its annual fee from reduced from 0.45% of the unpaid principal loan balance to 0.35%.