The entire mortgage industry is currently abuzz about a very exciting announcement that recently came out of the USDA. In October of this year, USDA Rural Development will be significantly reducing funding and annual fees on guaranteed home loans. What exactly does this USDA fee change mean for you?
Saving for Home Buyers
There are two significant benefits passed along to home buyers who take advantage of the USDA loan program:
- The upfront guarantee fee will change from 2.75% to 1.0% of the loan amount.
- The annual fee will change from 0.50% to 0.35% of the average scheduled unpaid principal balance for the life of the loan.
Effective October 1, 2016 through September 30, 2017; these reduced fees will equate to lower monthly mortgage payments and a lower total amount borrowed.
Refinancing for Existing Home Homeowners
Not only does this rural development fee impact those in the market for a home, the USDA has also announced a new ‘Streamline-Assist’ refinance program. Effective June 2, of this year, many homeowners have already taken advantage of these unique refinancing opportunities. With this program, homeowners have access to the same reduced fees but they do not have to provide a number of conventional requirements including:
- Credit Report
What is a Funding Fee?
The USDA up-front, or funding fee is financed in addition to the base loan size. A change of 2.75% to 1.0% of the total loan amount is significant regardless of the size of the loan. This fee reduction applies to both new home loans and USDA Streamline refinanced loans.
What is an Annual Fee?
Though it is charged monthly, the Annual Fee is determined based upon the mortgage balance each year on the anniversary of the loan. To arrive at this number, the annual fee factor is multiplied by the remaining balance and divided by 12. Such a significant reduction, from .50% to .35%, can save homeowners thousands over the life of a loan.
Take Advantage of The USDA Fee Change!
At Banner Mortgage we are in business to help our clients secure funding for their piece of the American Dream. On the rare occasion that the USDA offers significant savings opportunities for borrows, we jump at the opportunity to help our clients take advantage. In order to qualify for these exciting USDA fee changes, you must meet certain income limits. If you would like help determining if you qualify for the program, we encourage you to contact us today! Act now to get a USDA commitment before October 1.
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