USDA Guarantee Fee: What It Is, How It Works, and What You’ll Pay

When applying for a USDA loan, the guarantee fee is one of the most important — and often misunderstood — costs you’ll encounter. Though USDA loans offer no down payment and competitive rates, the guarantee fee is how the program stays funded.  For a full overview of how the loan works, check out our USDA Mortgage Guide.

In this guide, we’ll break down:

• What the USDA guarantee fee is

• How much you’ll pay

• How it compares to PMI or FHA MIP

• Where it appears on your loan documents

• How to calculate your monthly cost using our USDA Mortgage Calculator

What Is the USDA Guarantee Fee?

The USDA guarantee fee is a required cost for all USDA Guaranteed Loans. It helps fund the program and allows lenders to offer zero-down mortgages with lower credit risk.

There are two parts to the fee:

USDA Guarantee Fee Example

Let’s say you’re buying a home for $250,000 with zero down using a USDA loan:

Over time, the annual fee decreases as your loan balance goes down. It’s not a fixed cost like PMI on conventional loans.

How Does the USDA Guarantee Fee Compare to PMI or FHA MIP?

The USDA guarantee fee often costs less over time than other types of mortgage insurance.

Key Advantage: USDA fees are flat-rate, not based on credit score — making them predictable and often cheaper than PMI for lower-credit borrowers.

Can the USDA Guarantee Fee Be Waived or Refunded?

For most borrowers, the USDA guarantee fee is required and cannot be waived. However:

• The upfront fee is refundable if your loan is canceled before funding

• If you refinance into another USDA loan, you may get a partial credit toward the new fee

• Direct USDA loans (a separate, income-restricted program) have different fee structures

Where the Fee Appears on Your Loan Estimate

You’ll see both the upfront and annual fees listed on your Loan Estimate and Closing Disclosure under:

• Section A: Loan Costs (for the financed upfront fee)

• Section F or G: Monthly mortgage insurance (for the annual fee as part of your escrow)

Always review these carefully, especially the Loan Estimate and Closing Disclosure. To ensure you’re getting a fair deal, use a tool like Loan Watch — it analyzes your Loan Estimate, checks fees and rates, and helps you spot any red flags before closing.

Why the USDA Charges a Guarantee Fee

Since USDA loans don’t require a down payment, the guarantee fee helps offset the added risk for lenders. It’s similar in purpose to mortgage insurance but is set by the government and typically lower in cost than private insurance.

The fees also help fund the USDA loan program so it remains available to future borrowers.

Not sure if you qualify for a USDA loan? Learn about income limits, property guidelines, and more in our detailed USDA Loan Requirements guide.

Calculate Your USDA Loan Payment — Fees Included

Most online calculators leave out guarantee fees, giving you an unrealistic monthly payment.

That’s why we built the USDA Mortgage Calculator to:

• Automatically include the 1% upfront and 0.35% annual fees

• Show monthly principal, interest, taxes, and fees (PITIA)

• Let you experiment with different loan amounts and interest rates

Try it now and get a more realistic picture of what a USDA loan will cost you — no surprises.

FAQ: USDA Guarantee Fee