New 2016 USDA Upfront & Monthly Fees

Similar to FHA, the USDA mortgage requires two types of fees: an upfront guarantee fee and a monthly fee.

The term “guarantee” simply refers to USDA’s loan backing that allows lenders to issue loans according to its guidelines.

The upfront guarantee fee stands at 2.75 percent of the loan amount, and the “annual fee” is currently 0.50 percent, paid in twelve equal installments and included in each mortgage payment.

Starting on October 1, 2016, the upfront fee will be reduced.

  • Current upfront fee: 2.75%
  • New upfront fee: 1.00%

The monthly fee will also drop.

  • Current annual fee: 0.50%
  • New annual fee: 0.35%

The changes will be in effect until September 30, 2017. Typically, USDA re-examines financials of previous fee changes then raises, holds, or reduces fees accordingly. If loans in USDA’s portfolio perform well, another drop could come in 2017.

But the 2016 reductions alone equal big savings for USDA home buyers.

USDA Upfront Guarantee Fee Savings

The most significant change is in the upfront fee. The fee is typically added to the loan balance so that home buyers do not have to pay it in cash.

This is an advantageous arrangement, but it adds to the loan balance. At the current upfront fee of 2.75 percent, a USDA loan will add more than $6,800 in loan amount on a $250,000 home purchase.

The upfront guarantee fee reduction will significantly reduce the amount added to the loan. This translates a lower debt obligation, and lower payments.

USDA applicants will end up with lower loan amounts based on the new, lower upfront fee.

  • $150,000 home purchase: $2,625 loan balance reduction
  • $200,000 home purchase: $3,500 loan balance reduction
  • $250,000 home purchase: $4,375 loan balance reduction
  • $300,000 home purchase: $5,250 loan balance reduction

These lower loan balances also translate into reduced monthly payments as well.


Known as the “Colorado Luxury Expert”, Cory Calvin is a professional Colorado Real Estate Agent.

This was originally published on Cory’s blog. Visit the blog daily for housing and real estate tips and trends.