The USDA guarantee fee: upfront and annual costs on a USDA loan

The two fees

Upfront guarantee fee. A one-time charge, a percentage of the loan, collected when USDA issues the guarantee. Lenders can pass it on to you, and it can be financed into the loan.

Annual fee. A yearly charge, a percentage of the average scheduled unpaid principal balance, usually collected monthly with your payment. It is part of the housing payment the lender uses in your income ratios.

The current rates

USDA announces the rates for each federal fiscal year, which runs from October 1 to September 30. Its fiscal year 2027 notice to lenders says that for loans in that period, an upfront guarantee fee of 1.00 percent and an annual fee of 0.35 percent apply to both purchase and refinance transactions. The fiscal year 2026 notice listed the same rates.

Federal regulation at 7 CFR 3555.107 sets the outer limits. The upfront fee may not exceed 3.5 percent of the loan, and the annual fee may not exceed 0.5 percent of the average scheduled unpaid balance. USDA can change rates within those limits from year to year.

Where the fees appear

Your Loan Estimate shows the loan amount on page 1, including any financed upfront fee. The annual fee shows up in the projected payments table as part of the monthly payment, often labeled as mortgage insurance. The CFPB's Loan Estimate explainer shows where each piece sits.

Because the annual fee is part of the housing payment, it counts in USDA's income ratios. Federal rules use 29 percent of repayment income for the housing payment, including the annual fee, and 41 percent for total debt, with higher ratios allowed in some cases.

Compared with other loans

USDA's fees are often lower than FHA's mortgage insurance. FHA's upfront premium is 1.75 percent, and its annual premium for most loans is 0.50 or 0.55 percent. Conventional PMI depends on your credit and down payment, but it can be canceled once you build enough equity. USDA's annual fee keeps running, though it falls as the balance does.

The right choice depends on more than fees. USDA has income limits and location rules. FHA has none of those but costs more in insurance. Conventional loans reward strong credit. If you qualify for more than one, compare full Loan Estimates.

Timing across fiscal years

Rates are tied to USDA's fiscal year. USDA also notes that for about a week at the start of each fiscal year, its funding for new guarantees lapses, and it issues conditional commitments subject to funding. Lenders may still close on schedule. If your closing is near October 1, ask your lender which year's rates apply and whether the funding gap affects your file.

The bottom line

For fiscal year 2027, USDA's guarantee costs are 1.00 percent upfront, usually financed, and 0.35 percent a year on the average balance. Use the calculator to see both on your loan, and check that your Loan Estimate uses the current year's rates.