The USDA Loan fees for FY 2020 are: an upfront guarantee fee of 1.0% of the loan amount, and an annual fee of 0.35% of the loan amount. These fees apply to both home purchases and refinance transactions during the 2020 fiscal year, which runs October 1, 2019 through September 30, 2020.
On October 1st, 2016 the USDA implemented the changes to the loan fees, reducing the guarantee fee from 2.75% to 1.0% of the loan amount and the annual fee from 0.50% to 0.35% of the average scheduled unpaid principal balance for the life of the loan. This decrease went into effect for all USDA Commitments issued on or after October 1, 2016, regardless of the application date or the date the loan was submitted to USDA.
The change to the loan fees back in 2016 change was great news for USDA mortgages and USDA borrowers. The reduction lowered the upfront guarantee fee (which is financed or rolled into the loan amount), and had a direct correlation to a lower monthly payment from the annual fee. The fact that the fees have remained at this adjusted, lower rate through the 2019 fiscal year has been beneficial for home buyers who have used USDA home loans to finance their home purchases.
Curious about the difference this adjustment made for home buyers? Let’s take a look with an example.
For the purposes of this example, we are going to use a standard $200,000 loan amount before any upfront/guarantee fee. We will only be focusing on the changes so therefore we are not going to talk about rate for this example.
The guarantee fee (upfront) used to be 2.75%, so on a $200,000 home loan, your total loan amount would be $205,500. Now that the fee has changed to 1%, your new total loan amount would be $202,000. That means you would be financing $3,500 less dollars! That is a big difference!
On the annual fee side (which calculates to a monthly fee when you pay your mortgage each month), the old 0.50% would mean that on a $200,000 base loan amount, your monthly payment for Mortgage Insurance would be roughly $83.33 a month. With the reduced annual fee at 0.35%, the payment would now be roughly $58.33. That’s a $25/month difference in payment!
This is great news for borrowers, as the lower USDA loan fees allow for lower total loan amounts, lower monthly payments, and will allow for a higher pre-qualification value in certain cases.
USDA loans are often a great option for homebuyers who are purchasing qualifying properties – and, with these lowered USDA loan fees still in place now is a great time to secure a USDA home loan.
Interested in learning more about USDA Loans? Check out our USDA loan page for more detailed information about these government-sponsored loans.
Wondering if you qualify for a New York USDA loan? There are many areas throughout New York State that are USDA eligible. Find out if you and the property you are considering qualify for a USDA home loan here.
We’re here to help! The team of licensed loan originators at Maple Tree Funding will help you determine which type of loan is best for you and help you every step of the way as you work to secure that loan and purchase the home of your dreams!
Editor’s note: This content has been updated as of September 2019.