If you've already begun seeking out a mortgage and researching the different types of loan options available, you've probably received quotes from lenders regarding down payments and closing costs. You'll soon see that different loan options have different down payment requirements, as well as different items included as part of the closing costs.
One particular loan that many individuals find more favorable than others are USDA loans, which is a home loan backed by the government and offered by the United States Department of Agriculture. The USDA loan is a great loan option for families with less income or little in the way of savings, as the closing costs are typically much lower. Along with lower interest rates, it can also help a family just starting out save a significant amount of money on the purchase of a home and the subsequent monthly premiums.
What's included in the USDA closing costs?
An exact figure will depend upon the size of the loan and the down payment. However, a down payment is not required with a USDA loan, so an approved individual might only need sufficient funds to cover the regular expenses typically associated with the purchase of the home. These can include:
- An origination fee that is charged by the lender for performing the work.
- Lender fees.
- Notary fees.
- Title insurance fees.
- Credit repair fees (if necessary).
You might also be responsible for paying for an appraisal. Additionally, some fees could be wrapped into the financing, meaning you have even less to pay at closing, but your monthly premium will rise by a few dollars. It is also sometimes possible to have the seller pay for some of the closing costs as an incentive for you to purchase the home.
How will you know what your USDA loan closing costs are?
When you first apply for a loan, you should receive what is referred to as a "good faith" estimate from the lender. This gives you a breakdown of all the fees associated with the loan, lets you know what your expected monthly premium will be, and details all the items involved in the closing costs. The numbers can and often do change slightly, but it is illegal for them to change drastically.
Be sure to ask for a good faith estimate upon applying for a USDA loan. This will help avoid any surprises later and will also ensure that all fees and other associated USDA loan closing costs are provided up front, as they should be by any reputable lender.
When applying for a USDA loan, it's important to choose a lender who has ample experience with USDA loans and is knowledgeable enough to explain all the requirements, as well as help you complete and submit the proper paperwork in a timely fashion, ensuring that the mortgage process goes as smoothly as possible.
For more information about USDA loans and their closing costs, contact a professional mortgage lender experienced with USDA loans today.