USDA Streamline Refinance
USDA Streamline Inquiry
USDA Streamline Inquiry
Streamline Refinance USDA Loans – What are They?
Since the beginning, the USDA home loan program has helped people in rural and suburban areas across the United States become homeowners by offering flexible terms and relaxed credit requirements.
The refinance USDA loan works in much the same way. Offering existing homeowners opportunities to refinance their loans for better terms and interest rates.
The goal of offering USDA mortgage refinance opportunities to borrowers in these same areas is to support local economies in these small communities by keeping homeowners in their homes. The program accomplishes this by offering attractive USDA streamline refinance rates that reduce monthly mortgage payments and the amount borrowers pay over the lives of their loans.
To qualify for a refinance USDA loan, you must meet certain criteria for location, income, credit, etc. It is not a guaranteed loan for everyone, but it may provide an attractive and affordable refinance options for many interested borrowers.
The Streamline USDA refinance loan began as a pilot program only available in select states. The goal was to help current USDA home loan holders reduce their payments without a lot of red tape involved. It has since rolled out in all 50 states.
What Does the Refinance USDA Rural Development Loan Do?
The beauty of a refinance USDA Rural Development loan is that it offers opportunities for qualifying borrowers to refinance their homes for more attractive terms and more affordable interest rates even if they have little or no equity in their homes.
This is not a home equity loan or a rehab loan. It is simply an opportunity to refinance an existing home loan. But, for the homeowners affected by this program, it can mean the difference in keeping their homes and maintaining certain living standards or facing the risk of foreclosure due to high-interest rates, which translate to higher monthly payments.
The lower USDA streamline refinance rates mean that monthly mortgage costs decrease instantly. This provides relief to homeowners who are now free to use the monthly savings for a variety of purposes, including:
- Make neglected repairs to the home.
- Pay off smaller debts.
- Invest in the community.
- Stimulate local economies.
The list goes on making the USDA mortgage refinance program a win for the homeowners who qualify for the program and the rural communities they call home.
What makes the USDA Streamline Refinance Program Attractive to Borrowers?
There are many ways buyers find streamline refinance USDA loans attractive. Aside from the prospect of lower monthly payments, not to mention lower lifetime payments for the home loan, there are other benefits to the program to consider, including these:
- Straightforward application process.
- No new appraisals required. Some borrowers who received subsidies during their loans will need an appraisal, but the average borrower will not.
- No credit review required. Most USDA streamline refinance lenders will require verification that mortgage payments were paid according to the agreement for 12 months prior to the Streamline USDA refinance application.
- No home inspections.
- No calculation of debt ratio.
There is a lot to love about the USDA mortgage refinance option and many borrowers will see it as an opportunity to improve their financial situation and, perhaps, to achieve some personal financial goals.
That being said, this is not the best loan option for all borrowers and all situations. For instance, homeowners who have managed to build equity in their homes may be better served with home equity refinance loans that allow them to negotiate for lower interest rates while pulling some funds out to improve their homes or reduce their debt outlook by paying off smaller debts.
USDA Streamline Refinance Guidelines
Understanding the USDA streamline refinance guidelines will help borrowers determine if they may qualify for this type of loan and it the streamline refinance USDA option is the right choice for their current situations. These are some of the guidelines that must be met to qualify for refinancing USDA loans.
- Existing loan must be a USDA home loan. Other loan types, including VA, FHA, and conventional loans are ineligible.
- The refinance USDA program is only available for 30-year fixed rate mortgage loans.
- No income documentation is required for the streamline refinance USDA program, but USDA streamline finance lenders may require bank statements to ensure you do not exceed income limits of the program.
- To receive a refinance USDA loan, the home must be owner-occupied and cannot be used as a second home or for rental income.
- The USDA streamline refinance loan must reduce payments by $50 per month. This value includes principal, interest, and guarantee fees.
- You may add borrowers to the loan with a USDA streamline refinance loan, but you may not remove borrowers from the loan.
- No cash out is allowed with a streamline refinance USDA loan.
- Borrowers must provide verification that the previous 12 months of the loan have been paid on time.
Compared to conventional, FHA, and VA loans there is little paperwork and documentation involved in securing a streamlined USDA refinance loan making it an attractive option for borrowers reluctant to jump through 1,000 hoops to obtain a refinance loan.
Who Benefits Most from Refinancing USDA Loans?
Obviously, only those who meet the eligibility requirements can benefit at all by obtaining USDA loan refinancing. However, this is not the best solution for all borrowers. Those who already have low-interest rates, for instance, may not be served well by this loan type.
Additionally, borrowers who have a fair amount of equity in their homes might prefer other loan options that allow them to leverage that equity in a more favorable manner.
The key to all home loans and refinance mortgage options is for borrowers to weight the pros and cons to find their best loan options.