The USDA said that it is cutting its fees beginning on Oct. 1, 2016, the first day of fiscal year 2017. According to the announcement, the USDA is set to cut its upfront guarantee fee from 2.75% of the loan-at-close amount to 1%. Additionally, the USDA is cutting its annual fee from reduced from 0.50% of the unpaid principal loan balance to 0.35%.
So, what’s the reason for the cut? Better borrower performance, according to a USDA official. The USDA is able to cut its upfront and annual fees because borrower delinquency and foreclosure rates have reached “historic lows” since the beginning of the housing crisis. Additionally, the official said that successful partnerships between the USDA and the lenders who participate in its loan programs have resulted in “very strong” performance within this program.
To put this into terms of dollars saved: A $275,000 sales price with the new fees and currents rates is $55/ month cheaper than before. This increase the borrowers buying power by $10,000!
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