USDA loans do not use traditional PMI or FHA MIP. Instead, they charge a USDA guarantee fee — currently about 1% upfront (often financed into the loan) and 0.35% annual on the outstanding balance, which is typically lower than FHA mortgage insurance.
Two pieces make up the fee — an upfront charge and a smaller annual fee paid monthly. Here is how each one works on a typical Guaranteed loan.
Both programs charge insurance-like costs — but the structures differ. USDA’s annual piece is often cheaper than FHA MIP, while conventional PMI can drop once you hit 20% equity.
USDA often wins on monthly MI-like costs versus FHA — especially when you qualify for zero down in an eligible area. Conventional can win later if you build equity and cancel PMI.
The guarantee fee shows up in your monthly payment and, if not financed, in cash to close. Here’s how to think about it before you apply.
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Related guides to help you compare options and move toward pre-approval.
What $0 down means — and what cash to close still looks like.
How the USDA Guaranteed program works end to end.
How FHA upfront and annual MIP compare to USDA’s guarantee fee.
Requirements, calculator, and program details.
2MG Daily
Recent articles from our blog on USDA loans, rural eligibility, and zero-down financing.
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We will run the numbers on upfront and annual fees — and compare USDA to FHA and conventional for your scenario.