Are you currently under contract on a property with USDA 100% financing that will close after October 1? Or are you looking to purchase a new home with a USDA loan?
Obtaining 100% financing for eligible properties continues to allure buyers who have credit scores of 580 and higher. It is easy to qualify for a USDA loan because of the lower credit score minimum, no down payment requirement and no required reserves (assets).
However, we wanted to inform you there are changes to the USDA Guarantee Loan program coming up soon. The upfront Guarantee fee will decrease from 3.5% to 2% of the loan amount. The balance of the Guarantee Fee is paid over the life of the loan as a monthly fee that decreases each year as you pay down the principal.
See the example below using the purchase of a $100,000 home with the revisions in action, set to take effect October 1, 2011. New principal and interest payments will be lower, although the monthly payment will slightly increase by approximately $16-20 per month.
Click image to view larger or to print
If you are under contract, an important factor to consider: these changes will affect all USDA loans that have not been approved by USDA on September 30, 201. If you are under contract to close after October 1st, please contact your lender to make sure that the changes do not adversely affect your approval.