What is the USDA Streamlined Assist Refinance Loan?
The USDA Streamlined Assist Refinance Loan gives current USDA loan borrowers an opportunity to get lower monthly payments, regardless of negative equity. With a simpler application process, this refinance option features no debt-to-income limitations, no inspection or appraisal, and no loan-to-value requirements.
USDA Streamline-Assist Refinance Loan Basics
- Available to borrowers when their savings is greater than $50.00 per month
- Finance up to 100% of the home’s value
- No appraisal or calculation of debt ratios
- Borrower is not required to show employment documentation
- 620 minimum credit score required
- Prior to applying, borrower must have made 12 consecutive on-time payments
- 30 year fixed rate term option
- No prepayment penalties
- Primary Residence Only
- Additional borrowers can be added to the refinance, but borrowers cannot be removed
What are the benefits?
Generally No Appraisal Required
One of the key benefits of this streamlined program is that generally no appraisal is needed on the property for the refinance, eliminating associated fees and keeping money in the borrower’s pocket.
Eliminate Out-of-Pocket Expenses
The USDA Streamlined Refinance Loan not only makes it possible for rural homeowners to lower their monthly mortgage payments, but they can also roll all the closing costs into the new loan. Like all USDA rural housing loans, this loan is subject to the 1% upfront fee and 0.35% annual fee.
No Credit Examination
Unlike traditional refinance options, this program doesn’t require a credit review. However, the lender must verify that the current mortgage has been paid on time for 12 months prior to the refinance application.
Negative Equity Not an Issue
Even when a homeowner owes more on their current mortgage than the value of the property on the current market, they may be able to refinance with the USDA Streamlined program. This can occur when real estate prices have fallen since the home was purchased.
Who is eligible for a USDA Streamlined Assist Refinance Loan?
As with any USDA loan, the borrower must meet minimum qualifications.
- Borrower must already have an existing USDA mortgage to be eligible for a USDA streamlined refinance
- Borrower may not have any late payments within the past 12 months
- Total family household income must meet current USDA income eligibility requirements. USDA mortgage financing is intended for low and moderate income homeowners
- 30-year fixed loan terms only. 15-year or 20-year loans terms are not available
Other requirements of this program include:
- Flood insurance is required for all USDA-backed homes currently located in a flood zone
- The new mortgage rate must be at least 1% below the borrower’s current mortgage rate
- Properties no longer located in an eligible rural area remain eligible for a refinance transaction
- The refinance may include the principal loan balance, accrued interest, the upfront guarantee fee, and other eligible loan closing costs
In which scenarios is the USDA Streamlined Assist Refinance Loan useful?
For borrowers in rural areas who currently have a USDA home loan and based on current market conditions could save by refinancing, this can be an ideal program. Even homeowners with less than perfect credit, or who have little, no, or even negative equity may be able to benefit.
The simplified, inexpensive process makes it easier for homeowners to take advantage when a drop in mortgage rates comes along. By refinancing into a new home loan with a lower interest rate borrowers can often lower their monthly payment, reduce the amount of interest paid throughout the life of the loan, and realize significant savings.
Buying a Home with a USDA Streamlined Assist Refinance Loan
The streamline program is strictly for refinancing, but the USDA does offer an excellent purchase product. Intended to help low and moderate income borrowers buy homes in rural areas the USDA Rural Housing Loan offers one of the few 100% financing options on the market. Coupled with low interest rates and flexible credit underwriting it can be an ideal option for first time home buyers and repeat buyers alike.
Many consumers are surprised to see which properties qualify for USDA mortgage financing. The maps drawn by USDA Rural Housing to show which homes are eligible for these loans can be found online at usda.gov. The term “rural” might connote for some open farmland or one stoplight towns, but there are many areas with fairly dense population that are eligible. Clients who own homes or are shopping for property in towns they might think of as suburban or a medium sized town, may in fact find houses there that are eligible for a USDA mortgage.
USDA Streamlined Assist Refinance Loan Refinancing
The USDA Streamlined Assist refinance can help low to moderate income borrowers reduce their monthly payments. However, this program is not for borrowers seeking cash-out from the equity in their property. This refi option is only available to qualifying borrowers who have an existing USDA Home Loan. Borrowers with an FHA, VA, or Conventional loan are not eligible.
Other Programs to Consider
If the USDA Streamlined Assist Refinance Loan is not an ideal fit for a particular scenario here are a few other products to explore:
- FHA-simplified refinance option: FHA Streamline Refinance
- Non-streamlined refinance for borrowers with sufficient equity: USDA Fully Amortizing Fixed Loan
- Streamlined, simplified VA refinance loan: VA Interest Rate Reduction Refinance Loan (IRRRL)