Understanding USDA Streamline Refinancing and Its Benefits

Special USDA program helps thousands of homeowners?

Refinance your mortgage pictureIt is possible for current USDA loan borrowers with low or no equity to refinance for more reasonable payment terms through the USDA streamlined refinancing option, The refinancing process is simple and requires little paperwork.

Borrowers can choose from a variety of refinancing terms, and most qualifying loans are eligible for refinancing. The USDA streamlined refinancing option offers borrowers a convenient solution to lower their monthly payments and improve their financial stability.

How the program works

The USDA Streamline Refinance is a great option for borrowers who want to reduce their interest rate and monthly payments without having to go through a full credit check.

It is also a great option for borrowers who are in good standing with their mortgage and whose property meets USDA eligibility requirements.

To be eligible for a USDA Streamline Refinance, borrowers must currently have a USDA loan and must be in good standing with their mortgage. The property must also meet certain eligibility requirements, including being located in a rural area.

Borrowers interested in a USDA Streamline Refinance must provide information to your lender, including current mortgage and earnings.

The lender will use this information to determine if the borrower is eligible for a refinance and, if so, what interest rate they qualify for.

The USDA Streamline Refinance program helps current USDA loan holders refinance their mortgage into a new USDA loan. The program is designed to simplify the process of refinancing for applicants.

There are a few key things applicants need to know about the USDA Streamline Refinance program:

  1. The program is available to current USDA loan holders only.
  2. Only refinances into a new USDA loan are allowed under the program.
  3. The program offers a faster process and reduced paperwork requirements.
  4. The program allows for lower closing costs.
  5. The program has a higher interest rate than traditional refinancing programs.

How to qualify for the program

Couple reviewing financesTo be eligible for the USDA Streamline Refinance program, applicants must meet the following requirements:

  1. Be a current USDA loan holder.
  2. Have a good credit history.
  3. Have a stable income.
  4. Have a low debt-to-income ratio.
  5. Be a U.S. citizen or permanent resident.
  6. Own the property outright or have a very low loan balance.
  7. Meet the property eligibility requirements for the USDA loan program.

The benefits of the USDA Streamline Refinance Program

The benefit is a simplified approach that simplifies the refinancing process. Because you currently have a USDA home loan, it is unnecessary for the lender to ask for additional paperwork.

The simplified approach expedites loan closing and requires less documentation. Additionally, there is no requirement for a home inspection, and closing fees can be rolled into the loan, requiring less money up front.

No new appraisal required

No income verification required

Underwater properties welcome

Low and no-closing-cost options available

Costs associated with closing and escrow can be included into the new loan.

USDA Streamline Refinance Requirements

  1. You currently have a USDA loan
  2. A refinance must reduce your monthly payment by at least $50
  3. Your last 12 mortgage payments must have been on time
  4. Property must be your primary residence
  5. No cash out is allowed.
  6. USDA loans are available solely to primary residence owners and cannot be used to finance rental properties or second houses.
  7. Additionally, closing costs for the new loan may be rolled into the new loan, so avoiding out-of-pocket charges.
  8. There is no requirement for a credit report or a minimum credit score, however the mortgage lender may examine your credit to verify your mortgage payment history.
  9. The streamline refinancing loan is subject to a one-time cost of 1% and an annual fee of 0.35 percent. 

Top Reasons To Apply For A USDA Streamline Refinance Now

  • No Appraisal Requirement
  • No income documentation –
    The USDA streamline program does not need income documentation; nonetheless, income information will be requested to ensure the borrower's income is at or below the current USDA income limits. In other words, the lender will utilize income documentation to determine eligibility, not to determine qualification.
  • Borrowers. Borrowers may be added and removed from the loan as long as the original borrower is still present on the new loan.
  • Property location. If the property was previously located in a USDA-designated eligible area but is no longer, the loan remains eligible for any USDA refinancing.
  • Payment history.  The existing USDA loan must have been paid on time for the past 12 months. For both streamline and non-streamline programs, some unfavorable credit may be allowed provided the circumstances surrounding it were transient in nature and have since passed (i.e., was laid off, but now back to work).
  • Occupancy – All borrowers on the original loan must occupy the property when applying for the USDA streamline refinance.

Rotating question markFAQs About the USDA Streamline Refinance

Q. Can you get cash back on a USDA loan?

A. There is no cash back option available on USDA loan refinances. However, there may be other incentives available, such as a lower interest rate. Speak to a lender to find out more.

Q. Can you refinance a USDA loan to a conventional loan?

A. Yes, you can refinance a USDA loan to a conventional loan. However, there are some things you need to consider before refinancing. First, you need to make sure that the new loan has a lower interest rate than your current USDA loan. Second, you need to make sure that the new loan has no prepayment penalty. Finally, you need to make sure that you will be able to afford the monthly payments on the new loan.

Q. Can you refinance FHA to a USDA loan?

A. Yes, you can refinance an FHA loan to a USDA loan. The process is fairly simple - you'll just need to provide some documentation to your lender and they will take care of the rest. Keep in mind that there may be some fees associated with the refinance, so be sure to ask your lender about those before you proceed.

Q. Can you refinance out of a USDA loan?

A. Yes

Q. Do USDA loans have closing costs?

A. USDA loans do have closing costs, but they are typically lower than those of other types of mortgages. The USDA loan program is designed to help rural and low-income borrowers purchase homes, so the fees associated with the loan are kept to a minimum.

Q. Do USDA loans have income limits?

A. Yes, USDA loans do have income limits. In order to qualify for a USDA loan, your total household income cannot exceed the maximum allowable limit for the area in which you live.

Q. Do USDA loans have mortgage insurance?

A. Yes, USDA loans do have mortgage insurance. This insurance protects the lender in case the borrower defaults on the loan. There are two types of mortgage insurance for USDA loans: upfront and annual. The upfront mortgage insurance is a one-time fee that is charged at closing. The annual mortgage insurance is a monthly fee that is charged until the loan is paid off.

Q. Do USDA loans require escrow?

A. Yes

Read more about USDA loans with our questions and answers page

Conclusion: Is the USDA Streamline Refinance Program right for you?

To summarize, the USDA's simplified refinancing option enables current USDA loan borrowers with little or no equity to refinance into more reasonable payment terms. The refinancing process is simple, and can provide a much-needed financial relief. If you are a current USDA loan borrower with low or no equity, I encourage you to explore this option and see if it is right for you.

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Recommended Reading

  1. The USDA Loan: How It Can Help You Build Your Home
  2. USDA Loans: How to Use Seller Concessions to Your Advantage
  3. Discount Points Could Save You Thousands on Your USDA Loan