USDA Streamline Refinance for Existing USDA Mortgages in 19 States Affected by the Economic Downturn – The Details.
USDA Streamline Refinancing is a fairly new program launched in Feb, 2012 to help homeowners refinance their existing USDA rural home loans into new loan programs with lower interest rates.Borrowers who already have either a direct or guaranteed mortgage loan from USDA can qualify for the USDA streamline refinance. This new refinance program is currently in the pilot phase in 19 states that are considered to badly hit by the economic downturn and foreclosure crisis. Underwater (house worth less than what is owed on mortgage) homeowners can take advantage of this excellent program to refinance into a new loan under new terms without regard to their equity position in their home.
If you live in one of these 19 states and already have an outstanding USDA mortgage, contact a USDA approved lender at the earliest to initiate the loan process.
The states where the USDA streamline program is initially rolled out are: 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 current interest rates on 30-year fixed loans are at an all time low. For a credit worthy borrower, lenders are willing to finance at interest rates as low as 3.25%. Even with zero or negative equity, you can refinance yourself into a low fixed rate loan using the USDA’s streamline home loan.
According to the department’s estimates, a total of 235,000 existing mortgages may be eligible for this pilot refinance program.
Are your eligible? Find out about the USDA Refinance Guidelines.
The requirements to qualify are fairly easy and the most accommodating of all the underwater mortgage relief programs. The first and most obvious requirement is that you currently have an outstanding USDA rural development direct or guaranteed loan. The borrower should be current on the mortgage and must not have even a single late payment in the past 12 months. The overall household income must be within the income limits set by USDA. You may check for the latest USDA income limits and guidelines to assess if you meet this requirement. As USDA only guarantees residential properties that are being used as primary residences, you are required to be occupying the property as your primary home. Investment or second homes are ineligible.
If you meet the streamline refinance guidelines detailed above, there are numerous advantages quite unique to this program. A number of the standard qualifying guidelines for loan eligibility have been waived. The current employment of the borrower doesn’t determine your eligibility. Even unemployed borrowers can refinance using this program. An appraisal to determine the current value of the program is not necessary. No matter how much your equity or home value has eroded, you can still qualify. A credit report is not required, so your credit score or other credit blemishes won’t affect your qualification. The only credit requirement is that you had made your monthly USDA mortgage payments on time for the preceding 12 months. The upfront fee and the USDA annual guarantee fees can be financed as a part of your closing costs. This fee is still much lower than the VA or FHA fees. The debt ratios are not calculated as a part of underwriting analysis for streamline loans. If a borrower is currently unemployed, then the income prior to the unemployment must be documented.
This program is currently a temporary pilot program only active in 19 states that suffered the most significant home value erosion. Borrowers in other 31 states with USDA mortgages are not eligible. The program only allows for rate and term refinance transactions, so borrowers looking to cash-out any equity will have to look elsewhere for refinancing. USDA only allows 30-year fixed rate mortgages on all the loans it guarantees. This requirement makes it unsuitable for current USDA home owners looking to get an ARM (Adjustable Rate Mortgage) or a fixed rate loan with a shorter term. Additionally, the new interest rate through the streamline mortgage must be at least 1% lower than the borrower’s previous interest rate. The homeowner must also carry flood insurance if their primary residence is located in a designated flood zone.
The above mentioned program limitations are certainly reasonable and should be agreeable to the overwhelming majority of the borrowers looking to take advantage of the current historically lower mortgage interest rates.
The current pilot program, an integral initiative of President Obama’s plan for helping responsible homeowners, is expected to continue for 24 months starting February 1st, the day on which the program was announced. After the two year period, the program will be re-visited for any changes. In order to get started and obtain the latest info contact your current USDA lender or one of your USDA regional offices. For a list of these local offices and participating guaranteed lenders, visit USDA.gov. The borrowers in the 19 eligible states can treat this a streamlined loan modification program.