How is the monthly amount for the annual fee calculated?

The annual fee for a USDA Rural Housing Loan is calculated based on a percentage of the total loan amount. Specifically, the calculation involves multiplying the total loan amount by 0.350%, which represents the annual fee rate. Since this fee is assessed on an annual basis, to find the monthly amount, the result must then be divided by 12, as there are 12 months in a year.

This method ensures that the borrower understands how much they will need to budget each month for this fee, as it is typically paid monthly along with the mortgage payment. The use of the total loan amount multiplied by the percentage and then dividing by 12 is essential for deriving the correct monthly figure from an annual rate. Thus, this method provides a clear and accurate breakdown of the costs associated with the loan on a monthly basis.

Other options do not accurately represent the correct calculation for the annual fee in terms of converting an annual percentage fee into a monthly payment structure.