What is the annual fee percentage that must be added to the mortgage payment for USDA loans?

The annual fee percentage that must be added to the mortgage payment for USDA loans is indeed 0.35%. This fee is part of the USDA loan requirements and is used to fund the program, ensuring that it remains available to help low- and moderate-income families obtain housing in eligible rural areas.

The USDA charges this annual fee as a mortgage insurance premium, which is similar to the private mortgage insurance (PMI) required on conventional loans when a borrower has a down payment of less than 20%. The purpose of this fee is to protect lenders and ensure the sustainability of the USDA loan program.

By including this fee in the monthly mortgage payment, borrowers contribute to the funding of the program, which helps keep it operational and allows more individuals to benefit from the advantages of USDA loans. This percentage is lower than many other loan programs, making USDA loans an attractive option for eligible borrowers in rural communities.

Understanding this aspect is crucial for borrowers as it impacts the overall affordability of their loan payments. Therefore, recognizing the correct annual fee percentage of 0.35% is essential for those considering a USDA loan.