USDA Loan 3.50% Guarantee Fee
One of the most frequent questions that come up when discussing the USDA Loan program is the 3.50% fee that appears on the good faith estimate. USDA Loan are a "budget neutral" loan program offered through the U.S. Department of Agriculture. This means that the loan doesn't rely on U.S. tax payers for funding or assistance. Instead the program is self-funding through the 3.50% "Guarantee Fee" charged at the settlement table. This is a straight pass through fee from the lender to U.S. Department of Agriculture.
The 3.50% Guarantee Fee is calculated at a flat 3.50% of the loan amount when being paid upfront at settlement. If included or financed into the new loan then the calculation is based on the following formula: Loan Amount/.965 - Loan Amount, which is slightly higher than a straight 3.50% calculation. The vast majority of financing transaction involving the USDA Loan Program include the Guarantee Fee as being financed into the loan. This is why the USDA Loan sometimes is described as allowing for 103.50% Financing.
To learn more about your USDA Loan Financing options using the USDA Rural Loan Program go to USDARuralLoan.com or email info@USDARuralLoan.com. I specialize in USDA Loans, am approved to lend nationwide, and can be reached at (866) 747-2882.