USDA mortgage rates lower than most
To date, the USDA home loan has helped millions of people buy homes in rural and suburban neighborhoods across the U.S.
But this program now allows powerful refinance options to promote more affordable housing.
Thankfully, USDA loan rates are low.
These mortgage rates often beat their conventional counterparts (i.e. Fannie Mae and Freddie Mac) by one-quarter percentage point or more.
Potential savings from the USDA refinance are growing.
Furthermore, the popular USDA streamline refinance has been rolled out in all 50 states. After a successful pilot program in 34 states, the program was rolled out nationally in 2017 and is still available in 2022.
Now, thousands more U.S. homeowners have access to an appraisal-less, unlimited-LTV refinance.
About the USDA streamline refinance program
The USDA streamline refinance is a program for homeowners with a . The program was made public in 2012.
The streamlined USDA program was meant to mirror other successful streamlined programs such as the from the FHA, the VA streamline refinance () from the Department of Veterans Affairs, and the HARP program from Fannie Mae and Freddie Mac.
Also called the USDA Streamlined-Assist Refinance, this program’s qualifying hurdles are low, with fast underwriting and closings.
USDA loans close quickly because the agency enforces minimal eligibility standards :
- The home you’re refinancing must be your primary residence
- The home must be mortgaged via a USDA Direct Home Loan or a USDA Guaranteed Home Loan
- Prior to applying, you must have made 12 consecutive on-time payments
- Your payment must drop by at least $50 per month
And, that’s it. With the USDA streamline refinance, there are no credit report requirements, no home appraisal requirements, and no property inspection requirements.
And, you don’t have to qualify using your current income. Current documentation is only collected to ensure you are still within USDA income limits.
Most credit scores are accepted into the USDA streamline refinance program, and a home’s loan-to-value is not a consideration. Underwater homeowners can use the program as easily as a homeowner with 20% equity can.
This loan even allows you to wrap your closing costs and escrow charges into the new loan amount. That helps homeowners receive a zero out-of-pocket refinance for which no cash is needed up front.
USDA streamline refinance now available in 50 states
When the USDA streamline refinance program was first introduced, the government limited its geographic range to a sub-set of states.
The agency did this because the program a new one and the USDA wanted to roll-out the program in “beta”, so to speak. With limited distribution, it would be easier to identify problems with the program; and to make operational changes with limited impact on U.S. homeowners.
The USDA chose to make its fledgling streamlined refinance program available in 19 states which it identified as the “hardest hit” by last decade’s economic downturn. The USDA reasoned that homeowners in these 19 states would benefit most.
The initial 19 states selected by the USDA for its USDA streamline refinance pilot program were Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Rhode Island, South Carolina and Tennessee.
The program worked.
The USDA streamline refinance helped U.S. homeowners get access to low mortgage rates and provided bona fide payment relief to USDA-backed households.
Because the program was successful, the U.S. Department of Agriculture opted to extend its national footprint by an additional 15 states, for a total 34.
Following repeated, successful tests, the program is now available in all 50 states. USDA-loan-holding homeowners in any region can use this powerful rate reduction program.
There are now 3 types of USDA refinances
USDA offers multiple refinance types to suit different homeowner situations.
1. USDA Streamlined-Assist refinance
The most popular, and, arguably, beneficial refinance type that USDA offers is the USDA Streamlined-Assist program outlined above.
This loan requires no appraisal, no credit check, and no income qualification. Plus, underwater homes are eligible.
But USDA offers two additional types of refinances for other homeowners
2. Standard streamline refinance
This USDA standard streamline program follows generally the same rules as the Streamlined-Assist loan.
No appraisal is required, and underwater homes are eligible.
But this option is not as flexible in other ways. For instance, homeowners must provide proof of current income, and meet debt-to-income standards that apply to USDA home purchase loans.
Additionally, standard streamline borrowers can’t roll closing costs into the new loan. Upfront cash would likely be required.
So, why would a homeowner choose this option?
- There is no requirement to drop the payment by $50
- Existing borrowers on the note may be removed if at least one original borrower remains on the loan
So, in the case of divorce, a homeowner might choose a standard streamline loan to remove the ex-spouse.
Likewise, if only a $40 per month reduction in payment is being achieved, the homeowner is not eligible for a Streamlined-Assist loan and could choose the standard streamline option.
3. USDA non-streamline refinance
USDA also offers a standard “full” refinance that mimics non-streamline options available through Fannie Mae and Freddie Mac.
This loan requires an appraisal, and the maximum loan amount is 100% of the home’s current value, plus the new guarantee fee.
Borrowers must meet credit and income guidelines similar to those applied to USDA home purchase loans.
A homeowner might use this loan type to avoid the $50 payment reduction requirement for the streamline refinance option, or to remove a borrower from the note.
Additionally, this non-streamline option allows closing costs to be rolled into the new loan if the new appraised value is adequate, a feature that is not available on the standard streamline.
Where do I find a USDA streamline refinance lender?
As a consumer, you should know that not all lenders offer the USDA streamline refinance (as this reader found out).
That’s normal. Lenders choose which loan products they are going to offer based on the amount of business they think they will receive from it.
Some lenders won’t offer a certain type of loan, and another lender will specialize in it to pick up all the business others are leaving behind.
As a mortgage consumer, keep checking around with local and national banks, both in-person and online, until you find one that offers your desired program.
Other USDA streamline refinance notes
The USDA streamline comes with additional advantages.
You may be able to reduce your annual fee, for one.
In October 2016, USDA reduced its fees as follows.
- Former annual fee: 0.50%
- New annual fee: 0.35%
In addition, the upfront fee was slashed from 2.75% to 1.00%. That makes a USDA streamline refinance more affordable at its outset, and monthly. The new fees are helping homeowners achieve the minimum payment reduction requirement of $50 per month for the Streamlined-Assist program.
Additionally, you are geographically eligible for a USDA refinance even if eligibility maps changed since you bought your home. Your status as a USDA homeowner is your eligibility, not current USDA maps.
USDA refinances help reduce the costs of homeownership, but many USDA borrowers ask if there is a USDA cash-out refinance.
All USDA refinance types are “rate-and-term” loans only, meaning no cash may be taken out at closing.
Still, with all the refinance options now available through USDA, homeowners are saving serious money each month, which is putting millions of dollars into the collective pockets of USDA homeowners nationwide.
Check your USDA streamline refinance eligibility
Today’s mortgage rates are still incredibly low. There are opportunities to refinance and save good money. Plus, with the USDA streamline refinance, it’s simple to check your eligibility and get closed on your new, lower-rate mortgage.
Take a look at today’s real mortgage rates now. Your social security number is not required to get started, and all quotes come with instant access to your live credit scores.