Which of the following about funding or guarantee fees for USDA Rural Development loans is true?

• A. There is no funding or guarantee fee.
• B. There is a funding/guarantee fee required for USDA Rural Development loans.
• C. The fee is charged only if borrower income exceeds the limit.
• D. The fee is paid by the seller.

Answer: (B)

Funding or guarantee fees are charges that support USDA Rural Development loan programs and guarantee the loan. An upfront guarantee fee is required, and there is also an ongoing annual guarantee fee based on the loan balance. The upfront fee is typically a percentage of the loan amount and can often be financed into the loan rather than paid in cash at closing. The annual fee is paid as part of ongoing monthly payments. These fees are not tied to the borrower’s income level, and while a seller might contribute toward closing costs in some negotiations, the fee itself is generally paid by the borrower to the USDA. This is why the statement that a funding/guarantee fee is required for USDA Rural Development loans is true.