USDA Upfront Guarantee Fee - Change Update
Date: October 1, 2012Effective October 1, 2012 the USDA Guarantee Loan program will increase the percent charged on the Annual Fee to .4% of the outstanding loan amount from .3% of the outstanding loan amount. The upfront 2.00% fee charged on all USDA Purchase transactions will remain unchanged. The upfront fee on USDA Refinance transactions will increase from 1.50% to 2.00%
One of the most frequent questions that come up when discussing the USDA Loan program is the 2.00% fee that appears on the good faith estimate. USDA Loan is 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 2.00% "Guarantee Fee" charged at the settlement table and the Annual Fee, which is paid monthly based on the pro-rated portion of the Annual Fee. This is a straight pass through fee from the lender to the U.S. Department of Agriculture.
The 2.00% Guarantee Fee is calculated at a flat 2.00% 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/.98 – Loan Amount, which is slightly higher than a straight 2.00% calculation.
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