What is the upfront guarantee fee on a USDA loan?

The correct answer to the upfront guarantee fee on a USDA loan is 1.0%. The USDA (United States Department of Agriculture) Rural Development program requires borrowers to pay an upfront guarantee fee that has been set at this percentage to help support the program financially. This fee can typically be financed into the loan amount, making it more accessible for borrowers who might be concerned about cash flow at closing.

The significance of the upfront guarantee fee is to ensure that the program continues to support low and moderate-income borrowers in rural areas. This fee is distinct from other potential fees that may be associated with different loan types, such as FHA loans, which have a different structure for their upfront mortgage insurance premiums. Understanding the financing terms and conditions tied to USDA loans is critical for loan officers, as they guide clients through the process and help them understand their financial responsibilities.