USDA announces decrease to the Upfront Fee and the Annual Fee effective 10/01/16
USDA's Upfront and Annual Fees are Getting Smaller are decreasing effective 10/01/16.
The USDA has announced that effective with new submissions dated 10/01/16 or after, they will be reducing the are required upfront guarantee fee from 2.75% to 1%, and there will also be a reduction in the annual fee from .50% to .35%.
This translates to some real savings, not only with the monthly payment but at closing too.
The upfront guarantee fee is financed into the loan amount on a USDA transaction and the amount of the guarantee fee affects the initial loan amount.
Initial Loan Amount at Closing Difference
Under the rules prior to 10/01/16:
$100,000 loan amount with a 2.75% upfront guarantee fee would result in a final loan amount of $102,750
Under the new rules effective 10/01/16
$100,000 loan with a 1% upfront guarantee fee would result in a final loan amount of $101,000
On a monthly payment the savings are significant too...
Monthly Payment Savings Difference
Under the rules prior to 10/01/16:
$102,750 loan amount with an annual fee of .50% would result in a monthly annual fee amount of $42.81
Under the new rules effective 10/01/16
$101,000 loan amount with a .35% annual fee would result in a monthly annual fee amount of $29.46 per month
As a reminder the Annual Fee is included in the monthly payment and is not collected separately.