FAQ: How is the USDA Guarantee Fee Calculated?

Q: How is the USDA Guarantee Fee Calculated in Charlie?

A: In Charlie, the USDA Guarantee Fee is calculated through a two-step process, depending on whether the Guarantee Fee Financed Type is Complete or Partial. The system follows specific calculation logic to determine the Borrower Funding Fee Amount and the final Note Amount for USDA loans. 

Calculation of Final Guarantee Fee (Borrower Funding Fee Amount)

Rule Group 1: Complete Guarantee Fee Financed

• IF:

  • Mortgage Type = USDA

  • Guarantee Fee Financed Type = Complete
    

• THEN:

Step 1:

• Calculate an Unrounded Note Amount as: [Base Loan Amount] / [1/([Borrower Funding Fee Percent] / 100)] = [note amount unrounded] 

This is an intermediate calculation. The unrounded note amount is used internally in the system’s code and does not display in the UI.

Step 2:

• Calculate the Borrower Funding Fee Amount as: [Note amount unrounded] * [borrower funding fee percent] = [borrower funding fee amount]

Round the result to two decimal places.

Rule Group 2: Partial Guarantee Fee Financed

• IF:

  • Mortgage Type = USDA

  • Guarantee Fee Financed Type = Partial

• THEN:

Step 1:

• Calculate the Unrounded Note Amount as: [Base Loan Amount]  + [MI and funding fee financed amount] = [note amount unrounded] 

Even though this is labeled as unrounded, the inputs (Base Loan Amount and MI and Funding Fee Financed Amount) are already rounded to two decimal places.

Step 2:

• Calculate the Borrower Funding Fee Amount as: [note amount unrounded] * [borrower funding fee percent] = [borrower funding fee amount] 

Round the result to two decimal places.

Calculation of Note Amount (Including Guarantee Fee)

For all USDA loans:

• Note Amount is calculated as: [note amount] = [borrower funding fee amount] - “cents” amount of fee + [base loan amount] 

Specifically:

• Take the Borrower Funding Fee Amount, remove any fractional cents (i.e., round down to the nearest cent), and add it to the Base Loan Amount.

Summary of USDA Guarantee Fee Calculation Flow:

1. Determine Guarantee Fee Financed Type (Complete or Partial).

2. Calculate Note Amount (Unrounded) using the relevant formula.

3. Compute the Borrower Funding Fee Amount, rounded to two decimals.

4. Add the Borrower Funding Fee Amount (cents rounded down) to the Base Loan Amount to get the final Note Amount.