Over 20,000 homeowners over the past three years used the USDA refinance program, accounting for about 7% of all USDA home loans according to Home Mortgage Disclosure Act (HMDA) data.
For homeowners who currently have a USDA loan, there are several options for refinancing when the time is right. These include the USDA streamlined refinance, the streamlined-assist, and the non-streamlined refinance. All three options can be smart choices in the right scenario.
Are you considering refinancing a USDA loan? Read on to learn more about the refinance options you have at your disposal.
There are three types of USDA refinance loans: Streamlined, non-streamlined, and streamlined-assist. Let’s take a look at the differences below.
The USDA streamline refinance program allows borrowers to refinance their current loan with closing costs and the upfront guarantee fee rolled in. You can also add and remove borrowers with a streamlined refinance. This option won’t always cost you a new appraisal fee, either. Appraisals are only required if you have a Direct USDA Loan (not a Guaranteed one) and are receiving a payment subsidy.
This is typically the most popular refinancing option during a low-rate environment. Again, a new appraisal is only required if you have a Direct USDA Loan and are receiving a payment subsidy. This option takes the longest to qualify for, as it requires you to be current on your existing mortgage for at least the last 12 months.
The non-streamlined refinance will always require a new appraisal. The benefit of having a new appraisal gives you the added equity and flexibility to refinance your loan balance, closing costs, guarantee fee, even subsidy recaptures (if you have a Direct Loan).
|Appraisal||Sometimes required||Sometimes required||Always required|
|Mortgage||Consecutive on-time payment history for the last 6 months||Consecutive on-time payment history for the last 12 months||Consecutive on-time payment history for the last 12 months|
|Borrower||Add new or remove existing borrowers||Add new borrowers or remove deceased borrowers||Add new or remove existing borrowers|
|Maximum Loan-to-Value||Up to the remaining loan balance||Up to the remaining loan balance||Up to the remaining loan balance|
|Additional Options||Finance-in closing costs and USDA guarantee||Finance-in closing costs and USDA guarantee||Finance-in closing costs and USDA guarantee, and subsidy captures|
No. Unlike other mortgage programs, there is no cash-out option with USDA loans. If you’re hoping to tap into your home’s equity, you’ll need to refinance using a different loan type — like a Conventional, VA or FHA loan.
The amount of time that must pass before you can refinance (also known as the “seasoning requirement”) for USDA refinances is 12 months. This means that you can’t refinance a USDA loan until a year has passed since closing.
For USDA non-streamlined and streamlined refinances, you also need to have made on-time payments for the last six months on your current loan. You’ll need on-time payments for the last 12 months for a USDA streamlined-assist refinance.
Homeowners who are using the USDA home loan can refinance their current loan into a new USDA loan with new terms or another loan type altogether.
Homeowners with a non-USDA mortgage cannot refinance their current mortgage into a USDA home loan. Anyone wishing to use the USDA loan refinance program must already have a USDA 502 Direct or Guaranteed home loan.