The USDA Refinance Pilot Program was originally introduced in 2012 to give rural home owners a chance to take advantage of record low interest rates. This pilot program was a success, therefore the program has permanently matured into the USDA Streamline Refinance.
Homeowners eligible for USDA Refinance must meet the following criteria:
- Your current loan must be a USDA Rural Development 502 loan thats is either ‘Direct’ or ‘Guaranteed’.
- Your mortgage payments must have been made on time for the past 12 months.
- The interest rate on your current mortgage must be 100 basis points above the refinance rate.
The Advantages of the USDA Streamline Refinance
The USDA streamline refinance does not require that the house be appraised or inspected. The homeowners will not have to submit to a credit check. The loan will have a 30-year term at a fixed rate that will decrease the homeowners’ current mortgage rates by at least 100 basis points. They will need to pay a fee of 1.5 percent, but those who cannot pay this amount up front can add this amount to the balance of the loan. One possible disadvantage may be that homeowners cannot take advantage of any equity they have in the home. With the USDA refinance, homeowners may not take cash out. Also, if homeowners are subject to the SFH direct loan subsidy recapture due, they cannot add this amount to their new principle loan amounts.
In the event that homeowners have recapture due, they are going to need to pay this amount before they can participate in the program. They may be able to subordinate this amount by contacting the Centralized Servicing Center (CSC) and asking that this be done.
How the USDA Refinance Program Benefits the Community
The USDA created this new program in order to help low down payment mortgage homeowners with who have paid their bills on time and have good credit histories remain in their homes with lower monthly payments. This benefits the larger community because homeowners have more money to spend and fewer are be forced into foreclosure, therefore property values stabilize. Furthermore, as people save money on their monthly mortgage payments, they have more money with which to pay their bills. They also have more money to put into the local economy.
Applying for the USDA Streamline Refinance
Homeowners wishing to apply for a Streamline USDA Refinance can do so by contacting an approved USDA lender.