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USDA Loan Rates, Lenders, Guidelines and Information

USDA Streamline Refinance: The Easy way to Refinance

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USDA Streamline Refinance- The Easy way to Refinance- USDALOAN.ORGIf you have a USDA loan and want to take advantage of today’s lower rates, the USDA streamline refinance is one of the easiest loans to obtain and close fast! The program is restricted to current USDA loans, which means you would have had to already go through the USDA process once before in order to qualify for this streamlined process. This time around, the process is definitely going to be easier and less time consuming for you because the hardest part of the process – determining your property’s eligibility is already done, which means waiting for the USDA to approve your loan is not necessary. This loan is meant to mimic that of the streamline refinance from other government backed loans, such as the FHA and VA streamline refinance and works in many of the same ways as those loans operate.

How to Qualify for a USDA Streamline Refinance

Qualifying for a refinance of your USDA loan is simple. First and foremost, the home you are refinancing must be your primary residence. This means that it cannot be an investment home or a second home – it must be the home that you and your family live in year round. The other obvious factor in qualifying for this loan is that you need to already have a USDA loan, which was spoken about above. In addition, the new interest rate that you will be obtaining will need to be a minimum of 1 percent less than your current interest rate in order to qualify for the program. The only other qualification s that you have a clear mortgage history for the last 12 months – this means that you made on-time payments for the last 12 months. The lender does not need to worry about your credit score (only the housing history counts) nor verify your employment/income. You automatically qualify with a clean mortgage history.

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Where do you Live?

The USDA streamline refinance program was originally started as a pilot program. This was back in 2012. It has since grown immensely, but is still restricted to certain states. It started in only 19 states – those states that were considered the hardest hit from the economic issues and housing crisis that occurred. Since that time, 15 more states have been added. If you want to know if your state is eligible, simply visit the USDA website to see if your state qualifies.

Requirements for the Refinance

If you are refinancing into another USDA loan, it is important to note that flood insurance is a requirement if your home is located within a flood zone – if you already have a USDA loan, chances are you already have this insurance in place. You will also be subjected to the same USDA fees that you incurred when you took out the first loan. This means that you will need to pay the upfront guarantee fee of 2% of the loan amount again as well as the 0.5% annual guarantee fee, which you are already paying on your current loan. Basically, the new charges will be any closing fees and the additional upfront guarantee fee.

The Terms

The terms of the USDA streamline refinance program are straightforward. Only 30 year terms are available, which means that you cannot shorten the length of your term by refinancing, as you can do with a conventional loan. In addition, only rate and term refinances are allowed – you cannot take cash out of the equity of your home with a streamline refinance. The program is meant to be as simple as possible in order to make it possible for homeowners to take advantage of the low rates available without having to go through the intensive approval process once again. If you were to take cash out of your home, a whole new file would have to be started and your income and ability to repay the loan would need to be assessed as a cash-out refinance is much riskier than a rate and term loan.

The largest benefit of the USDA streamline refinance program, aside from the ease of applying and qualifying for the loan is the fast processing time. If you remember from your original USDA loan, the process probably took a long time to get you to closing. This is because the lender must process your file, ensure that it is complete and then send it off to the USDA for processing. They need to then determine your property’s eligibility as well as determine that you fit the parameters of their guarantee guidelines. This process might have taken months. The streamline refinance, on the other hand, is typically complete within 3 weeks of the start of an application. This means that you can have your lower payments on your next mortgage payment if you start now!

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Streamline Refinance

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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.

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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.

Program Benefits

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.

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Limitations

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.

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