USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶16.4 — Upfront Loan Guarantee Fee

USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶16.4 — Upfront Loan Guarantee Fee

16.4 UPFRONT LOAN GUARANTEE FEE Lenders will pay the Agency the upfront guarantee fee through the LLC system interface with Pay.gov. The fee may be passed onto the borrower and is an eligible loan purpose. If the Agency is unable to issue the Loan Note Guarantee, the fee may be returned to the lender. Once the Loan Note Guarantee is issued, the fee is not refundable. The upfront guarantee fee amount is published in Exhibit K, of RD Instruction 440.1, available in any Rural Development office, or by selecting “Part 1800: General” on the Rural Development Instruction website located at https://www.rd.usda.gov/resources/directives/instructions. The fee is subject to change to maintain a subsidy neutral program required by Public Law 111-212. A. Calculation of Upfront Loan Guarantee Fee The maximum loan amount for a guaranteed loan is 100% of the appraised value plus the upfront guarantee fee. Eligible closing costs may be included in the loan amount up to 100% of the appraised value. Additional guidance on eligible closing costs is available in Chapter 6 of this Handbook. An up-front fee calculator is available for use by lenders and employees at https://www.rd.usda.gov/resources/usda-linc-training-resource-library. Refer to Chapter 6 of this Handbook for assistance in determining the maximum loan amount allowed for refinance transactions. HB 1-3555 (03-09-16) SPECIAL PN 16-7 Revised (08-05-25) PN 649 Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. There are three options for payment of the upfront guarantee fee. The following examples assume a 1% upfront fee. 1. Pay the entire upfront guarantee fee at loan closing Borrowers are not required to finance the upfront guarantee fee and may elect to pay the entire fee at loan closing from personal funds, seller concessions, or eligible gift assistance at settlement. Example: $100,000 loan x 1% = $1,000.00 upfront guarantee fee paid at loan closing. 2. Finance part of the upfront guarantee fee The borrower may elect to finance a portion of the upfront guarantee fee. In these cases, the borrower will pay an upfront fee that corresponds to the total loan amount that includes a portion the upfront fee. The remaining amount of the upfront guarantee fee not financed, will be paid by the borrower from personal funds, seller concessions, or eligible gift assistance at settlement. Example: $500 of the 1% fee will be financed; therefore, the total loan amount will be $100,500 loan x 1% = $1,005.00 (guarantee fee) In this scenario, the applicant will borrow $100,500.00 which includes $500.00 of the upfront guarantee fee. The borrower will pay the remaining $505.00 of the guarantee fee from personal funds at settlement ($1,005.00 total fee minus the $500.00 financed = $505.00) 3. Finance the entire upfront guarantee fee The appraised value may only be exceeded by the amount of the upfront guarantee fee financed. Therefore, the entire upfront guarantee fee may be financed into the total loan. Example: The appraised value of the subject property is $100,000. The purchase price of the property is $98,000. The borrower has elected to finance $2,000 in eligible loan closing costs that does not include the upfront guarantee fee. Begin with the base loan amount of $100,000 ($98,000 purchase price plus $2,000 eligible closing costs). Calculate the total loan amount including the entire upfront guarantee fee being financed as follows: $100,000 / .99 = $101,010.10 (total loan amount including the upfront guarantee fee) $101,010.10 x 1% = $1,010.10 (upfront guarantee fee). HB 1-3555 (03-09-16) SPECIAL PN 16-8 Revised (08-05-25) PN 649 Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts.

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