USDA Lowers Fees for RD Loans
Great news for homebuyers considering a USDA rural development home loan (RD Loan)! The already popular zero down mortgage is getting even better. The USDA announced this week that they will be decreasing both the upfront guarantee fee—a closing cost which is financed into the total loan amount at close; and the annual fee—the USDA version of PMI, which is paid monthly. Effective October 1st, the first day of fiscal year 2017, the upfront guarantee fee will decrease from 2.75% to 1%, and the annual fee will decrease from .5% to .35%.
Now, unless you spend your spare time studying loan program guidelines, that might sound like gibberish—so let’s do some math to show the savings. On a $200,000 home purchase, the upfront guarantee fee would decrease from $5,500 to $2,000 and the annual fee would decrease from $83 to $58. That is a savings of $3,500 on the total loan amount and $25 per month over the life of the loan!
Requirements for a USDA Rural Development Loan
You might be thinking, that’s great, but how do I know if a USDA rural development loan is the right fit for me? I’m glad you asked! Qualifying for a USDA RD loan is very similar to an FHA mortgage, but requires no down payment and has two important requirements for income limits and location.
Traditionally, when purchasing a home with less than 20% down, most loan programs require private mortgage insurance (PMI) to be added to your monthly payment. For this reason, USDA loans are more favorable, because their annual fee of .35% is significantly smaller than the .85% required for FHA loans.
Have a specific scenario you’d like to run past us? Give us a call to speak with one of our licensed loan officers, or check out our USDA Mortgage Calculator. We would love to recommend the best loan program for you and your situation.
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Buying a home with no down payment has never been better. Call Riverbank Finance today at 1-800-555-2098.