Interested in using the $0 down USDA loan program? Now’s the time to act!

For those of you who’ve been hesitant to take the plunge into home ownership, now would be a great time to consider doing so. This is especially true if you’re interested in utilizing USDA Rural Development’s $0 down home loan program. On June 25th the United States Department of Agriculture (USDA) issued a notice stating that they are increasing a portion of the fees tied to this loan program. The fee increase will become effective with the fiscal year of 2016, which USDA considers to be from October 1, 2015 through September 30, 2016.

The specific fee that’s increasing on October 1st, 2015 is the one-time upfront fee USDA charges the borrower in order to utilize the loan program. This fee–of which can be rolled into the loan–is currently 2.0% of the loan amount. Beginning October 1st the upfront fee will increase to 2.75% of the loan amount. The good news is that the monthly “service fee” USDA charges the borrower by USDA will remain unchanged at 0.50%.

What the increase to the upfront fee means is that (for example) on a purchase of a $130,000 home the upfront fee will go from $2,653.06 to $3,676.09, which represents an increase of over $1,000. All else equal, this fee increase will result in the average borrower’s monthly payment going up by $5. Granted, this isn’t a huge increase, but the big picture is that the cost of financing will increase should you wait to buy a home through the USDA loan program. Additionally, given the volatile nature of the mortgage industry, the low interest rates currently existing in the market could also go up if you wait to purchase.

As always please consult a qualified mortgage professional should you have any questions regarding this fee increase and how it could pontentially impact you.

Thanks for reading!