Good news for home buyers interested in the USDA home loan program! Effective tomorrow (October 1, 2016), the USDA program fees for USDA Rural Development’s Guaranteed Home Loan program are changing. The change has resulted in a significant reduction in both the “upfront guarantee fee” and the “annual fee”. These changes will make the USDA home loan option one of the most affordable home loan products on market.
The Upfront Guarantee Fee is being reduced from 2.75% to 1.0% of the loan amount. This fee is typically added to the loan balance, unless the buyer opts to pay it at closing. The lowering of this fee will potentially lead to a lower loan balance (if financed) and lower monthly payments for the buyer. The Annual or Monthly PMI Fee is being reduced from 0.50% to 0.35% of the average scheduled unpaid principal for the life of the loan. This also lowers the monthly payment for the borrower.
With zero down payment, the USDA home loan program has been a great option for first time home buyers. Now, it is an even more attractive option. While this loan program still has the same eligibility requirements, this could make the difference between approved and denied for some borrowers applying for this program. These changes prove to be validation of the increasing health of the housing and mortgage market.
To check the USDA eligibility map for your area, click here.