What Is USDA Guarantee Fee?
USDA Guarantee Fee: USDA's mortgage insurance: 1% of the loan upfront plus 0.35% a year, paid monthly.
The USDA guarantee fee pays for the government guarantee on a USDA loan. It has two parts.
Upfront fee
1% of the loan amount, usually financed. On a $300,000 loan, that's $3,000, making the loan $303,000.
Annual fee
0.35% of the loan balance per year, divided into monthly payments. On a $303,000 loan, that's about $88 a month in the first year. It's recalculated each year on the declining balance.
How it compares
USDA's fees are lower than FHA's (1.75% upfront plus an annual premium) and usually lower than PMI on a conventional loan with a small down payment.
Good to know
The annual fee lasts for the life of the loan. Refinancing to a conventional loan once you have 20% equity removes it.