USDA offers an assortment of refinancing options to homeowners that currently have a USDA mortgage. USDA Streamline Assist (Pilot) Refinance, USDA Streamline, USDA Non-Streamline. USDA started tested their “pilot” refinance program back in 2012, since that time nearly 10,000 homeowners refinanced their mortgages saving an average of $150 per month. These streamline refi programs are not unique to just USDA loans. Other options are also available to homeowners that have loans backed by FHA (Federal Housing Administration) and VA (Department of Veterans Affairs) Let’s take a look at all the options below.
USDA Streamline Assist (Formally USDA Pilot Refinance) The program is available to homeowners in all 50 states that currently have a USDA 502 guaranteed loan – regardless of original bank or lender.
The USDA Streamline Assist is designed for homeowners that were hit hardest with decreasing home values in recent years. This is especially important for home buyers that purchased their home with USDA, as most of them financed 100% of the purchase price. The new Rural Housing refi program allows homeowners to refinance their existing USDA mortgage into lower rates by eliminating the need for standard USDA inspections and requirements. The program does not require a new appraisal since the current home value is not a concern. There also is no new home inspection which helps reduce the amount of closing costs. This streamlined process shortens the time necessary to close on your loan and will require less documentation and fewer forms to fill out. Remember, the USDA Streamline Assist program only applies to homeowners that currently have a USDA Rural Development 502 Guaranteed loan. Not sure? Contact below for assistance.
The Streamline Assist Refinance program does have a few qualifying factors to be approved:
- The homeowner must currently have a USDA backed mortgage. We can assist you regardless of the original mortgage company that originated your USDA loan. Please note that FHA, Conventional, and VA loans are not eligible. These programs have their own streamline refinance versions, please contact us below for details about the FHA streamline or VA Interest Rate Reduction Refinance Loan (IRRRL)
- There is NO maximum loan amount limits.
- Single Family, Town Homes, and Condos only. Mobile and Manufactured homes not permitted.
- No appraisal, no home inspection and very limited documentation needed.
- No loan application fee to apply.
- The home must be owner-occupied, primary residence. Property cannot be listed for sale at the time of application.
- The home owners existing loan must have closed 12 months prior to the refinance request.
- Your mortgage payment must have been made on time for the last year. A new credit report will be reviewed to verify timely mortgage payment history.
- Homeowners that DO have equity in their homes cannot withdraw or “cash out” any equity. This program is only designed to lower the current interest rate and reduce monthly mortgage payments.
- The new loan term will be a 30 year fixed.
- Monthly mortgage payment must be reduced by $50.00 or more. The interest rate on the new loan cannot exceed original interest rate.
- USDA household income limits still apply for the refinance program. Please see the USDA Eligibility Page above for more information.
- Eligible homeowners must have a job or steady source of income when applying. However, debt-to-income ratio calculations are not required.
- Standard USDA annual (monthly mortgage insurance premium) of 0.35% apply.
- The USDA refinance guarantee fee is 1.0% – this fee along with all closing costs and pre-paid tax, insurance items can be rolled into the homeowner new loan, regardless of current home value. NO out of pocket cash is needed from the homeowner to close.
Let’s look at a good candidate for the Streamline Assist refinance below:
Betty and John live in Arkansas, they purchase their first home back in 2006 for $170,000. They finance their home through a mortgage company using the 100% USDA 502 Guaranteed loan and received a 6.5% interest rate at closing. Unfortunately, home values declined since purchasing and today their home is only worth $155,000. They would like to refinance their mortgage because they know current USDA interest rates are much lower today. Their issue is many bank programs require 80% loan to value in order for them to refinance. Betty and John do not have any equity in their home, in fact, they are upside down (negative equity) on their home value. Betty and John’s income is still below the USDA household limit for their county in Arkansas. They also have been making their mortgage payments on time, never late.
Would they a good candidate for the Streamline Assist program? Yes! First, their income is still below the USDA limits, Second, they have paid their mortgage payments on time. Third, their new interest rate would be significantly less today.
Please be sure to check the USDA Refinance FAQ page here for more examples and frequently asked questions.
Regular USDA Streamline Refinance: This USDA refinance option is available to all states. For a streamlined USDA refinance – the current mortgage principal, interest, USDA guaranteed fee as well as closing costs, may be included in the new loan. However, an appraisal is required for this option. The homeowner can request a new loan balance up to 100% of the home’s appraised value as long as no cash back is received. Like all USDA loans, the 1.0% upfront fee guarantee fee is required on this refinance and can be rolled into the new loan amount, even if it exceeds the final loan amount above the new appraised value.
Please note, these refinance options are only available for Section 502 Guaranteed loans, not direct USDA loans. How do you know what type of USDA loan you have? If you received your loan from a traditional mortgage company, bank or broker – you likely have a 502 Guaranteed loan. If you received your USDA loan directly from the USDA, you have a Direct USDA loan. USDA direct loans are more tailored for lower income households. While the 502 Guaranteed program is designed for more moderate income household and make up the large percentage of USDA loans today. Due to the higher volume of 502 Guaranteed loan, these loans are processed only by USDA approved mortgage companies, not directly by the USDA.
Need to speak to a loan specialist about the USDA refinance options? Connect with us by calling ph: 800-691-8826 or submit the Quick Contact form on the right side of your page. Mobile users will find the Quick Contact form at the bottom of their page.