USDA loans are a popular type of home financing because they have easy qualifying requirements and no down payment requirement. For people with low to moderate income, USDA loans can open the door to homeownership that may not have been available with conventional home financing. If you have a USDA loan, you may have considered refinancing before. Refinancing can help you secure a better interest rate or preferable terms, depending on what you’re looking for. Read on to learn about different types of USDA loan refinance types and be sure to contact Nickel City Funding for more on home financing in North Tonawanda, Hamburg, Amherst, West Seneca, and Lancaster, NY.
USDA loans are a type of nonconventional loan – that is, they are insured by a division of the federal government (the U.S. Department of Agriculture). A mortgage refinance replaces an old mortgage loan with a new USDA-insured loan. There are three types of refinance available for USDA loan recipients: streamlined, non-streamlined and streamlined-assist.
USDA Streamlined Refinance
USDA Streamlined refinance does not require a new appraisal on a home. The maximum new loan value is limited to the current balance of the USDA loan (including interest). That means you’ll never owe more on your USDA Streamline refinanced mortgage than you did on your old USDA loan.
USDA Non-Streamlined Refinance
USDA Non-Streamlined refinance do require a home appraisal before they are approved. When it comes to Non-Streamlined refinancing, the loan is limited to the value of that appraisal. You can design your Non-Streamlined loan to include certain closing costs and an upfront guarantee fee (in addition to your current loan balance), which means little money out of pocket when you close.
USDA Streamlined-Assist Refinance
A third option for USDA loan refinancing, Streamlined-Assist, like Streamlined refinance, does not require a new appraisal, unless necessary to calculate subsidy. Like with a Non-Streamlined refinance, you may roll certain closing costs and other fees into the new loan balance, which means lower up-front costs.
There are a few eligibility guidelines to consider for USDA loan refinance.
To get approved for a Streamlined or Non-Streamlined USDA refinancing, take note of a few requirements:
- Your new, refinanced loan must have the same interest rate or lower than your existing mortgage.
- You must have had your original USDA loan for at least 12 months and paid on time for 180 days.
- You will need to provide full income and credit documentation, and your debt-to-income ratio may play a role in your approval (though you may request a waiver, so this information is not included).
To get approved for a Streamlined-Assist USDA refinancing:
- You must have closed your original USDA loan at least 12 months prior to your loan application and have paid your mortgage on time for at least the prior 12 consecutive months
- Your interest rate cannot exceed your existing rate
- You must demonstrate at least a $50 net benefit from refinancing
- You can add borrowers to your agreement if you desire.
Is USDA Refinance Right for You?
If you’d like to compare the different types of USDA loan refinance and get a free quote, contact Nickel City Funding. Our certified mortgage professionals will look at your unique financial situation and help narrow down the best-possible refinancing solutions for your needs. We help clients in North Tonawanda, Hamburg, Amherst, West Seneca, and Lancaster, NY, so let’s get started today!