The up front Guarantee Fee for USDA refinance loans and the Annual Fee for both purchase and refinance loans will increase for the new fiscal year beginning October 1, 2012, through September 30, 2013.
Effective October 1st, 2012, the new fees will be as follows:
Up front guarantee fee (this is the up front fee the USDA charges to participate in the program and is usually financed into the loan amount):
Purchase transactions: new fee effective October 1st, 2012 2% (no change)
Refinance transactions: new fee effective October 1st, 2012 2% (up from 1.5%)
An example of how the up front fee is calculated. For a sales price of $200,000, the up front fee would be 2% or $4000, and typically that would be added to the loan amount to make the final loan amount $204,000.
Annual Fee (this is the monthly fee paid with the mortgage payment):
Purchase Transactions: new fee effective October 1st, 2012 .40% (up from .30%)
Refinance Transactions: new fee effective October 1st, 2012 .40% (up from .30%)
An example of how the annual fee is calculated. For a loan amount of $204,000, the new annual fee would be .40%, or $204,000 x .04 = $816 divided by 12 for a monthly figure of $68 per month. This amount would be paid with the monthly mortgage payment.
The up front and annual guarantee fee increase has allowed the USDA home loan program to be a stand alone program which pays for itself, thus removing it from the annual Congressional budget process. In the past, the USDA guarantee loan program has run out of money as the fiscal year neared its end, and in many cases loan closings were delayed. This new fee structure has removed that uncertainty around funding for the program which should help avoid these lapses in availability.
Baxter Scruggs is a mortgage banker specializing in USDA loans in California, NMLS #156370. He can be reached at firstname.lastname@example.org, or at 760-497-7705, or toll-free at 877-347-0004, ext. 226. Licensed by the California Department of Business Oversight under the California Residential Mortgage Lending Act. The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Terms and conditions apply, all loans subject to underwriter approval. Subject to change without notice. Guild Mortgage Company NMLS #3274