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What is the difference between a USDA Guaranteed Loan?

USDA-Guaranteed-Loan?

The USDA provides a guarantee for certain types of USDA mortgages, which means that the United States Department of Agriculture will guarantee a portion of the loan if the borrower defaults. This guarantee makes it less risky for lenders to offer home loans to home buyers, as they know that the USDA will cover a portion of the losses if the loan defaults.

The USDA guarantee can be up to 90% of the loan amount, which provides significant protection to lenders. This guarantee allows lenders to offer home loans with competitive interest rates and more flexible credit requirements, making homeownership more accessible for low to moderate-income individuals and families in USDA rural housing areas.

What is the USDA Guarantee Fee? 

The USDA charges a guarantee fee for these home loans, a one-time fee paid by the borrower at closing. The guarantee fee helps fund the USDA’s loan guarantee program and covers the costs of administering the program.

The guarantee fee amount varies depending on the loan amount and can range from 1-2 basis points of the loan amount. The fee can be paid in cash at closing or into the loan amount. In addition to the upfront guarantee fee, borrowers may be required to pay an upfront mortgage insurance premium (MIP) and an annual MIP.

It’s important to note that the USDA guarantee does not mean that the borrower is guaranteed to be approved for a home loan. Borrowers still need to meet certain credit and household income requirements, and the purchased property must be located in an eligible rural area. However, the guarantee provides additional protection to lenders, making it easier for borrowers to obtain financing.

It’s important to note that the guarantee fee for USDA home loans is typically lower than the fees charged by other federal housing-backed loan programs, such as loans FHA, VA, Freddie Mac, or Fannie Mae loans. The lower guarantee fee can help make a home mortgage more affordable for borrowers, especially those with limited funds for a down payment.

It’s also worth noting that the guarantee fee and other loan costs can be negotiated between the borrower and lender, so it’s important to shop around and not just use depend on one finance agency, and compare loan offers to find the best deal.

What is the USDA-guaranteed loan interest rate?

The USDA Guaranteed Loan program offers competitive interest rates to eligible borrowers seeking to purchase or refinance a home in a rural area. The lender determines the interest rate for a USDA Guaranteed Loan and is typically based on the borrower’s creditworthiness, the loan amount, and the current market conditions. 

However, the USDA imposes a cap on the interest rate that can be charged, which helps ensure that borrowers receive fair and affordable rates. Generally, the interest rate for a USDA Guaranteed Loan is lower than the rates offered by conventional loans, making it an attractive option for many homebuyers in rural communities.

How Do you find a USDA-guaranteed loan lender?

To find a USDA Guaranteed Loan lender, you can start by asking your Realtor! If you don’t have one yet, let us know, and we would be glad to send a list of lenders we have used in the past. You can also use the USDA’s lender search tool on their website. This tool allows you to search for lenders participating in the Guaranteed Loan program by state, county, and lender name. 

Additionally, you can search for lenders online or in your local community and ask if they offer USDA Guaranteed Loans. When considering a lender, it’s essential to research their reputation, customer service, and interest rates to ensure you’re getting the best possible deal.

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About Mantle Realty

Mantle Realty is a leading independent real estate firm based in the Triad of North Carolina. Mantle is passionate about providing clients with  cutting edge technology and hometown service, whether they are buying or selling a home.

Many of Mantle Realty’s agents have lived in the areas they serve their entire lives, and love turning their clients into their neighbors. With offices in Kernersville, Lexington, and High Point, Mantle is equipped to cover all of the Triad with convenience and care.