Roll Closings Costs into a USDA Loan

Roll Closing Costs in on a USDA Mortgage

Roll Closing Costs in on a USDA Mortgage

Yes, it’s true!  A borrower may roll closings costs into an Arizona USDA loan!  USDA financing will allow a USDA buyer to finance closings costs into their loan if there is enough equity in the home.  The appraisal that was ordered by the borrower’s Arizona USDA lender must show that the home being financed by a USDA home loan has enough equity to allow the buyer to roll closing costs into a USDA loan.

USDA allows a borrower to finance up to 100% of the appraised value of the home on purchase transactions.  If the home appraises for more than what the buyer is purchasing it for, the USDA buyer may roll closing costs into a USDA loan.  The contract price plus the financed closing costs however cannot exceed the appraised value of the home.

Example of How to Roll Closing Costs into a USDA Loan:

Take a look at the following example to see how a USDA buyer can finance their closing costs when the appraised value permits.

Hypothetical Purchase Scenario:

USDA Buyer Name: Susie
Purchase Price: $250,000
Appraised Value: $260,000
Closing Costs: $5,000

In this case, Susie could choose to pay her USDA closings costs either out of her pocket and finance a base USDA loan amount of $250,000 OR she could choose to roll closing costs into a USDA loan and borrow a base loan amount of $255,000.   Note that USDA does charge a “guarantee fee” that is financed on top of the base loan amount.  A USDA borrower’s final loan amount (loan amount including the guarantee fee) can exceed 100% of the home’s appraised value.

It is also important to note that discount points are only allowed to be financed into a USDA mortgage on a loan for families that are considered “low-income” by Rural Development.  Click HERE for more information.

Please call or email if you have any questions!

By Jeremy House

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