USDA Refinance

Program Overview

If you bought your home using a Section 502 Direct or Guaranteed Loan — both of which help people of modest incomes buy homes in rural areas — you may be able to refinance through the United States Department of Agriculture (USDA).

The USDA initiative lets borrowers refinance at a lower interest rate so that they can lower their monthly mortgage payments to more manageable levels.

Those looking to refinance through the USDA — sometimes even if they are underwater on their homes — may be eligible for any one of the three USDA refinance programs available.

Program Availability

Not every home owner is eligible for one of the USDA Refinance programs, nor does every lender offer this program.  At AMEC, I work with over 40 lenders from across the country and I can work with you to help you determine if you may be eligible.

The first step is to determine whether your mortgage is owned or guaranteed by the U.S. Department of Agriculture.

If you need assistance in determining whether or not you have a USDA mortgage, contact us today at (920) 632-4902 and with some basic information about your current mortgage we can assist you in finding this information out within a few minutes.

Additional Eligibility Requirements

Now that we have determined that you currently have a USDA mortgage, the next step is to ensure that you qualify for one of the USDA Refinance programs.  To be eligible for any of the USDA Refinance programs you must meet these minimum requirements:

  • You must have a Section 502 Direct or Guaranteed loan
  • Income documentation must be provided for all household members
  • The property being refinanced must be your primary residence
  • The new loan must have a term of 30-years
  • The new loan is subject to a 2% upfront fee and a 0.4% annual fee (paid monthly)

USDA Streamline Refinance

This option, which is available only for Guaranteed Loans, does not require an appraisal.  The new loan amount can’t be more than the principal on the existing loan plus a guarantee fee of 0.4% of the loan amount.  In addition, the accrued interest, closing costs and lender fees can’t be folded into the new loan.

The lender will require that we run your credit report (borrowers with bad credit must have a credit waiver) and will require a debt-to-income ratio of 29/41.

This means that the lender prefers that your housing costs don’t exceed 29 percent of your monthly gross income and that your total housing costs plus other debt payments don’t exceed 41 percent.

USDA Non-Streamline Refinance

The non-streamlined program, which requires an appraisal, is available for Section 502 Direct or Guaranteed Loans.  The interest, closing costs, guarantee fee of 0.4% of the loan amount, and lender fees can be folded into the loan — as long as you have built up sufficient equity in the house (this is determined by the appraisal).

The maximum loan amount can’t exceed the fair market value of the home, which will be determined by the appraisal.

The lender will require that we run your credit report (borrowers with bad credit must have a credit waiver) and will require a debt-to-income ratio of 29/41.

Rural Refinance Pilot Program (WISCONSIN IS ELIGIBLE)

This program is only available in select states and for those with either a Section 502 Direct or Guaranteed Loans.

Those refinancing a guaranteed loan will not need an appraisal, but you will need one if you are refinancing a Section 502 Direct Loan that has received a subsidy.  Like with the non-streamlined financing option, the interest, closing costs, guarantee fee of 0.4% of the loan amount, and lender fees can be folded into the loan.

The lender only has to verify that your last 12 months of mortgage payments were made.  The lender will require that we run your credit report,  but the pilot program does not have debt-to-income requirements.  The new interest rate will be fixed at a minimum of 1 percent below the current rate and the loan will be for 30 years.

Have Additional Questions?

If you have additional questions about getting mortgage help, we are available 24/7 to answer any questions you have about the FHA Streamline Refinance Program.  Give us a call at (920) 632-4902 today.

Research shows that homeowners who work with housing experts like those at AMEC are more successful and have better long-term outcomes.  We will help you understand your options, design a plan to suit your individual situation and prepare your application.

 

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