This past week the United States Department of Agriculture (USDA) announced that effective October 1, 2011, the USDA Upfront Guarantee Fee on their RURAL Development home loan program, will be reduced from it’s current level of 3.5% of the purchase price to 2.0%. This change will reduce the borrower’s loan amount and therefore their monthly payment as well. Additionally, on October 1, 2011, USDA will begin charging a monthly Guarantee Fee equal to .3% of the loan amount.
To put this into financial perspective… on a $200,000 loan amount, the Upfront Guarantee Fee added to the borrower’s loan, would be $4,000 (instead of $7,000) and the monthly Guarantee Fee would be $50. USDA indicates they will review this new policy approximately one year from implementation to determine if changes are necessary.