What is the upfront guarantee fee for USDA loans?

The upfront guarantee fee for USDA loans is 1%. This fee is an important aspect of USDA financing, as it helps to fund the program and ensure its sustainability. The upfront fee is calculated based on the total loan amount and is typically added to the loan balance, allowing borrowers to finance this cost rather than pay it out of pocket at closing.

By charging this fee, the USDA is able to provide financial assistance to eligible buyers in rural areas without requiring a down payment. This is essential, as it increases affordability for many first-time homebuyers who may struggle to save for both a down payment and closing costs.

It's also worth noting that there is an annual fee that borrowers pay as part of the USDA loan program, which is an ongoing cost that must be factored into overall loan calculations. However, the upfront guarantee fee specifically refers to the one-time payment made at closing and is set at 1%. Understanding this fee structure is crucial for potential borrowers when evaluating the overall cost of a USDA loan.