USDA Programs Guaranteed Loan Changes
USDA has 2 main borrower programs, a “Direct” loan, which is an interest rate subsidy loan that USDA loans directly to qualified low income borrowers, and a “Guaranteed” loan program where USDA insures institutional loans made to qualified borrowers, based on geographic and income qualifiers. Here’s a link to the qualifiers:
http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?NavKey=home@1
Currently, USDA charges borrowers an Upfront Guarantee Fee of 3.5% of the loan amount.
Effective with USDA commitments on/after 10-1-11, an Annual (monthly) Borrower Fee will be added, the Upfront Fee will be reduced.
The Upfront Guarantee Fee will be reduced from 3.5% to 2% for purchase transactions. This fee can be financed into the loan amount with an LTV up to 102% (100% financing), or paid in cash.
The Upfront Guarantee Fee for refinance transactions will remain at 1%.
The USDA will implement a new Annual (monthly) Fee of 0.30% charged on all loans with a Conditional Commitment issued on or after October 1, 2011. This fee will be added to the borrower’s monthly payment and will remain for the life of the loan. The initial Annual Fee, for the first year of the loan, will be calculated based upon the guaranteed loan amount. For the remaining years of the loan, the Annual Fee will be calculated on the average annual scheduled unpaid principal balance of the loan, not the actual unpaid principal balance.
Examples for a $100,000 30 year fixed loan at 4.250%, Old vs. New:
Loan amount Upfront fee Annual (Monthly) Fee Monthly payment total
With Upfront fee P/I/Monthly fee
Old
$103,500 3.5% / $3500 -0- $509.16
New
$102,000 2 .0% / $2000 $24.87 $526.65
Bottom line, about $17 more per month on $100,000 loan.
Fee calculators can be found here:
https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do.
The calculators are located in the Loan Origination section under Documentation and Resources.
Now you're an expert...until next time....
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