MANSFIELD — Effective Oct. 1, 2016, the United States Department of Agriculture reduced the costs associated with its 100 percent Rural Development Home Loan — making an already economical mortgage program even more affordable for buyers looking to purchase a home in a designated USDA rural area.

A USDA Rural Development (RD) home loan has always been a great option for home buyers — particularly first- time buyers — because it provides up to 100 percent financing, meaning that no down payment is required.

These low barriers-to- entry have allowed many borrowers to get the financing they need while only having to pay two additional fees on top of their monthly mortgage payment: the upfront guarantee fee and an annual fee.

These fees are similar to those charged by the Federal Housing Administration (FHA) on its home loan programs and are required in order to keep the home financing program operational.

But as the housing market recovered, the costs of this program decreased, and the USDA has decided to pass the savings onto borrowers.

Below are explanations and examples of these two fees.

Upfront Guarantee Fee

This fee is typically added to the loan amount so borrowers don’t have to pay it with cash. While convenient, this still increases the overall loan amount. However, with the reduction, borrowers will owe less upfront and have a lower monthly payment.

Current fee: 2.75 percent of the loan amount

New fee: 1 percent of the loan amount

Example: $200,000 loan: old fee = $5,500, new fee = $2,000

Annual Fee

The annual fee is currently equal to 0.50 percent of the loan balance and is paid each year over twelve months. As the loan balance decreases, the fee paid each year decreases. The reduction means borrowers will have lower annual fees and lower monthly payments.

Current fee: 0.50 percent of the loan balance (on $200,000, 1st year fee = $83.33 p/month)

New fee: 0.35 percent of the loan balance (on $200,000, 1st year fee = $58.33 p/month)

With these changes, one of the most affordable housing programs is now even more affordable. Those looking to buy a home in a designated USDA rural area (addresses may be checked for eligibility here) should consider this option when searching for a home.

About Roy Stevens

Roy Stevens (NMLS221164) is a branch manager and loan originator with CrossCountry Mortgage, Inc., a nationwide mortgage lending and refinancing company headquartered in Brecksville, OH. His office is in Mansfield, Ohio.