What can you expect to pay in closing a USDA home loan? In general, a home buyer will pay from 3-6% of the sales price in closing costs and prepaid tax and insurance escrow. The seller will have closing costs that they pay and the buyer will have their own closing costs.
There are some benefits of a USDA mortgage when it comes to closing costs. First, the seller is allowed to give a concession to the home buyers closing costs. The USDA will allow the seller to pay up to 6% of the buyer’s closing costs. These closing costs and escrows can be negotiated into the purchase contract and paid by the seller as part of the deal. If the seller will not pay the closing costs, the USDA will allow another option for the home buyer who wants to close with a lower out-of-pocket payment. This option is to include closing costs into the new loan. In this case, the buyer is financing the closing costs and the seller is not involved in that part of the transaction. The USDA will allow a pre-approved buyer to finance their closing costs if the property’s appraised value supports the increase in the loan amount. The home must appraise high enough to use this option.