USDA Rural Housing announced today their upfront guarantee fee, plus the annual (monthly PMI) fee will soon be decreasing starting October 1st 2016. This change will apply to both purchase and refinance transactions and stay in place until September 2017. Home buyers can expect some significant savings, below we have included an example for a $150,000 home purchase:
Home Purchase Price $150,000
Current Guarantee Fee 2.75% Staring October 2016 this will be reduced to 1%. Savings to home buyers = $2,625.00
Current Annual Fee (monthly PMI) is .50%. Starting October 2016 this will be reduced to .35%. Monthly Mortgage Payment Savings = $32.00 per month.
From USDA Rural Housing: The USDA upfront guarantee fee and annual fee structure that will be effective for Single Family Housing Guaranteed Loan Program (SFHGLP) loans in fiscal year (FY) 2017, which begins October 1, 2016 and ends at the close of business on September 30, 2017. The upfront guarantee fee will be reduced from 2.75% to 1.0% of the loan amount. The annual fee will be reduced from 0.50% to 0.35% of the average scheduled unpaid principal balance for the life of the loan.
USDA Loan Guidelines for 2016:
- Currently, a min 620 credit score is required by most lenders and banks to get approved.
- The home being purchased must be located in a USDA approved area. See the map here.
- current debt to income ratio limits is 29/42. This can be exceeded in some cases with strong qualifying factors like great credit, great job history, assets, etc.
- Household income ( the entire family) must be below the income limits set for each county.
- USDA permits the home seller to pay buyer closing costs and pre paid escrow items like taxes, insurance.
- USDA mortgages do not have a set loan amount limit. The home buyer qualifies based on their debt to income ratios.
Here are a few interesting facts about the USDA home loan:
- USDA Rural Housing loans are 30 year fixed rate mortgages – secure and backed by the US Government.
- Rural Development loans also have very competitive low interest rates
- No loan amount limits or purchase price limits
- USDA 100% home financing does not have pre-payment penalties – you can move or sell whenever
- Upfront guarantee fee and monthly PMI much less than FHA mortgages
- The USDA RD program does not require a down payment, first time buyers class or time consuming requirements
Learn more about the USDA fee reduction in the video below:
Home buyers that have a question, or want to learn how to apply for a USDA loan can visit us at www.UsdaMortgageHub.com or call ph: 800-691-8826 Monday-Sunday.