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.