USDA Streamline Refinance and Non-Streamline Refinance

USDA Streamline Refinance and Non-Streamline Refinance

USDA Streamline Refinance

The USDA Streamline home loan program offers responsible homeowners the option to refinance with a federally insured loan. This loan program offers both streamlined and non-streamlined options for refinance. Non-streamlined refinance borrowers can roll their existing principal as well as closing costs and fees into the loan—an option that is not available for streamlined refinances. 

USDA Streamline Refinance

The USDA Streamline Refinance home loan program offers responsible homeowners the option to refinance with a federally insured loan. Streamlined refinances through the USDA program do not require a new credit check, other documentation such as bank statements, or appraisal, but they do require a home inspection to ensure that the property meets all HUD requirements. The home inspection will check all major systems in the house to make sure the property is safe and sanitary and will give an itemized list of things that need to be repaired. The costs associated with any repairs or additions can be included in the total loan amount, assuming it does not put the loan over the 90% threshold for a USDA loan. 

Additions such as broadband internet or energy solutions and approved water conservation methods can also be added into the loan. Costs such as lender fees, accrued interest, or closing costs cannot be included in the loan amount. Streamlined refinances involve a more in-depth look at every aspect of the loan process and therefore must be manually underwritten. A streamlined refinance is not available for direct loan but for Section 502 guaranteed loans only. Section 502 loans are used where the loan is fully serviced and handled by a private lender whereas a direct loan is managed directly through the Rural Development department.

USDA Non-Streamlined Refinance

For homeowners in a rural part of the county in need of financial help, the USDA Non-Streamlined Refinance program allows borrowers to roll in their existing principal as well as their closing costs and fees into the loan. For all non-streamlined refinances, an appraisal will be necessary to assess the current market value of the home and the loan amount and its availability to add in the guaranteed fees and closing costs.

USDA Home Loan Refinance Benefits

There are several benefits to a USDA Home Loan Refinance, including: 

  • Low, fixed-interest monthly payments
  • Low to know closing costs for streamlined loans
  • Low monthly mortgage insurance
  • 90% USDA financing
  • No prepayment penalties
  • USDA interest rates which are historically lower than traditional interest rates
  • Streamlined refinance option through USDA

Basic Requirements for a USDA Refinance

The USDA rural loan program supports financing for thousands of rural families every year. They are continually taking steps to streamline their USDA refinancing programs. This program is designed to offer low-cost, fixed-rate 30-year mortgage terms for homeowners who are currently financed through the USDA loan program. 

To be eligible, the mortgage being refinanced must have been a USDA-issued loan when the loan originated. In addition, borrowers must have a financial benefit resulting from the finance, which can include adding repairs and approved property upgrades to meet HUD standards. All borrowers seeking to refinance their current mortgage must be up-to-date on all mortgage payments and associated fees and costs.

Rural homeowners were hit particularly hard in the recent real estate market collapse and the USDA is aware of that. As a result, they’ve custom-tailored their rural loan program to help those individuals with low to moderate incomes to overcome the financial hurdles that have popped up in recent years. 

With the work USDA is doing, becoming financially stable again at an affordable mortgage rate is a real possibility. With a continuance of declining home values across the country, especially in rural areas, there could be no better time to investigate the possibility of the federally-backed USDA rural loan.