By John Rives
How much is the cost of a USDA loan going up? If you are shopping for a new home and are considering getting a USDA loan, you should hurry, as there is a USDA loan fee increase scheduled for October 1. USDA loans are one of the few loans that offer home buyers in rural areas a no-money-down option for their mortgage. The current loan guarantee fee for USDA loans of 2% is going up to 2.75% on October 1, 2015.
According to Bloomberg, an e-mail from USDA spokesman David Sandretti, states the move will enable the $24 billion program “to continue to sustain itself without a congressional appropriation to offset credit-related costs.”
The current guarantee fee of 2% for an $180,000 USDA loan is $3,600. This cost is usually included in the loan increasing the total loan amount to $183,600. When the guarantee fee goes up to 2.75% in October, the new fee for an $180,000 loan will be $4,950. That’s an increase of $1,350, increasing the total loan amount to $184,950.
While the guarantee fee which is a one-time fee charged by all government mortgage programs including USDA, FHA, and VA is increasing, the annual fee (monthly PMI) for USDA loans will remain the same at 0.50 percent.
The USDA has invested more than $117 billion to support rural home ownership but the home loan program was temporarily halted in 2010 when the USDA ran out of money. Last year, over $19.9 billion was invested by USDA which helped approximately 140,000 families purchase homes in rural areas.
If you are considering buying a home with a USDA loan, you can save money by purchasing the home before October 1 of this year. For more information on which McKee Homes neighborhoods qualify for USDA loans and details about the loans, contact us at 910-672-7296.