Save money on mortgage fees? Yes, please!
Already a good option for many homebuyers, a USDA* home loan just got even better with lower fees. Over the course of 10 years, you would save a total of $6,500 in upfront and annual fees on a $200,000 mortgage. Awesome, right? Keep reading.
Fortunately, these cost-effective mortgages aren’t just for farms and acreage. The USDA footprint sometimes encompasses an entire small town or includes suburban areas that may not appear to be rural. Surprisingly, some rural-zoned properties are quite close to urban amenities.
Here’s what you need to know about USDA mortgages in general:
- USDA home loans often offer 0% down and makes them very attractive to first time home buyers.
- USDA’s footprint can encompass places that do not appear to rural, check with your KBHS Mortgage Loan Originator to see what is available in your area.
In addition to the existing benefits of a USDA mortgage – including flexible credit requirements and no down payment needed – the upfront guarantee fee and annual fee will be reduced starting with Fiscal Year 2017 (FY17). This decrease applies to purchases AND refinancing for single-family home loans with a conditional commitment date of October 1, 2016 or later.
Doing The Math
Before adding up the savings, let’s explain the fees.
The Upfront Guarantee Fee refers to the USDA’s loan backing that allows approved lenders (including Stearns) to provide mortgages according to USDA guidelines. This 1.0% fee is due when your loan is underwritten.
The Annual Fee serves the same purpose as the Upfront Guarantee Fee and is paid once a year for the duration of your mortgage. The FY17 rate is calculated at just 0.35% of the average scheduled unpaid principal balance.
The following example shows how much money a buyer would save when purchasing a $200,000 home in FY17 (October 1, 2016 to September 30, 2017).
Upfront Guarantee Fee
Previous rate of 2.75% – $5,500 fee
FY17 rate of 1.0% – $2,000 fee
Resulting in a savings of $3,500!
Previous rate of 0.5% – $1,000 fee
FY17 rate of 0.35% – $700 fee
Annual savings of $300!
Over the course of 10 years, you would save a total of $6,500 in upfront and annual fees. Just imagine what you could do with that extra chunk of change!
Purchasing a home is a big deal … but you don’t have to do it alone. If you’re considering buying your first home, moving up, downsizing or refinancing, contact one of our trusted mortgage loan originators today.
* Borrowers must qualify at a certain income level depending on the county where the property is located. The property must be in a designated rural area. Actual savings may vary from the illustrated sample based on interest rates and amortization schedule. Reduced USDA guarantee fees apply to loan applications that have been issued a Conditional Commitment for Single Family Housing Loan Guarantee on or after Oct. 1, 2016.
Sep 20, 2016