If 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 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!