USDA Loan Refinancing

If you've received a United States Department of Agriculture (USDA) loan in the past, you know how beneficial this program can be for low- to medium-income homebuyers. By providing $0 down and lenient eligibility requirements, the USDA loan is able to open the housing market to buyers who would not otherwise qualify.

Even better news for current USDA loan borrowers looking to lower their rate, the USDA offers three favorable refinancing options: USDA streamline refinance, USDA streamline-assist and a non-streamlined refinance.

USDA Streamline Refinance Eligibility

If you've received a USDA mortgage and feel that your rate is higher than the current rate, refinancing your loan is an option. There are a few requirements, however, to meet before you begin the refinancing process.

• The mortgage to be refinanced must already be a USDA loan (Guaranteed or Direct).
• The mortgage to be refinanced must be current for the 180 days prior to the refinance request.
• The existing loan must have closed 12 months prior to the USDA refinance request.
• The homebuyer must meet the USDA’s debt-to-income ratio and credit requirements.
• The maximum loan amount must not exceed the original loan amount at time of purchase.

Those interested in USDA streamline refinancing should know that cash cannot be taken out of a USDA streamline refinance. However, those refinancing may roll the guarantee fee into the final loan amount.

USDA Streamline-Assist Refinance

The USDA streamline-assist refinance is often seen as the most favorable USDA refinance option.

This program does not require a new appraisal, credit checks or calculations of debt-to-income ratios. Additionally, borrowers with little or no equity in their home may apply.

USDA Streamline-Assist Refinance Eligibility

Requirements for the USDA streamline-assist refinance are similar to that of the streamline, with a few additional details that include:

• The refinance must result in a $50 or greater reduction in the borrower’s monthly payment.
• The existing loan must be current for the 12 months prior to the refinance request.
• Those refinancing a USDA direct loan will require a new appraisal.
• Borrowers may be added to the note, but not removed.

Non-Streamline Refinance

The USDA’s non-streamline option is very similar to the USDA streamline; however, borrowers are required to get a new appraisal.

Borrowers considering this refinance option may do so to avoid the $50 payment reduction requirement for the streamline-assist or to receive an updated appraisal on their home.

Note that by refinancing your existing loan, your total finance charges may be higher over the life of the loan.