USDA Loan Rural Refinance- Homeowner Q&A: Below we have listed some of the commonly asked questions for the new USDA Loan Rural Refinance available in all 50 states. Do you have a question? Please contact us below.
Please note, the USDA Pilot refinance program is now known as the Streamline Assist program. All the latest 2020 USDA refinance requirements can be found in the USDA Refinance page in the menu above.
Question: I received a FHA back in 2010, can I use this new USDA program to refinance my mortgage? H.Leven – Wichita, Kansas
Answer: The program is only reserved for homeowners that currently have a USDA RD mortgage. Homeowners with an FHA mortgage can click the highlighted link → to learn about the FHA streamline refinance program.
Question: I purchased my home around 5 years ago using the 502 Guaranteed USDA mortgage. I currently owe around $200,000 on my loan, but the value of my home has gone down a lot and have negative equity. I believe my house is only worth around $150,000 now. Will I still be eligible for this USDA refinance? G. Jackson – Tallahassee, FL
Answer: Yes, the program allows for an unlimited loan to value (LTV) – it does not matter how much you are underwater or “upside down” on your home loan. The USDA Pilot program is designed for these situations. No new appraisal is needed with the USDA Pilot Refi.
Question: What are some of the main requirements lenders look for with the USDA Streamline Assist refinance loan? S. Gordon- Tampa, FL
Answer: First, the homeowners must have a USDA Rural mortgage with NO late payments in the 12 months. Second, income eligibility requirements do apply for anyone living in the household and earning any income – even if they are NOT on the loan application. The household income must be under the limits in place for each county. Please click to learn more about USDA household income limits. This same USDA income requirement applied to the household when the home was originally purchased.
Question: I called my current USDA loan company Chase Bank and they don’t offer the Pilot or Streamline Assist program, or any options for me to refinance my USDA mortgage. Can you help me? L. St.John – Birmingham, Alabama
Answer: Yes, as long as you originally obtained a USDA 502 Guarantee loan (regardless of the lender or bank currently servicing your USDA loan) we can help you. We often receive calls from USDA homeowners that have their RD loan currently serviced by Chase, Bank Of America, SunTrust, Regions, US Bank, etc. Many of these banks and lenders do not offer the USDA Refinance programs.
Question: How do the closing costs work for the USDA refinance, how much money do I need to plan to bring to closing? T. Ruben –Columbia, South Carolina
Answer: All closing costs, tax and insurance escrows plus the new 1.0% USDA guarantee fee can be rolled into the new loan if the homeowner likes. There is no out of pocket costs to the homeowner.
Question: I paid a 3.5% Guarantee fee to USDA when I received my loan back in 2006. Will I need to pay this fee again if I decide to refinance my home. J. Fernandez – Bend, Oregon
Answer: Yes, the USDA refinance program will require that you pay the Guarantee Fee again. The current USDA refinance Guarantee (or funding fee) is 1.0 percent as of 2020. This guarantee fee can be rolled into your new loan along with all other closing costs – no out of pocket costs to the homeowner.
Question: I heard the USDA requires a monthly mortgage insurance costs now? I didn’t have this when I originally received my loan in 2007. Is this now required with the Pilot refinance? A. Hassell – Winter Garden FL
Answer: Great question. Yes, all USDA loans originated require a small monthly mortgage insurance premium to be paid each month. This is for both refinance and purchase loans. Homeowners that received their USDA loan before October 2011 do not currently have this monthly charge. If their loan is refinanced into a new loan, it will be required for the life of the loan – 30 years. The amount of the fee is .35% of the loan amount, very small when compared to other loans like FHA, etc. During the loan evaluation, the USDA loan specialist will review this with you in detail. They will check to ensure the savings plus lower interest rates will still make sense with the monthly mortgage insurance charge being added.
Question: Are the terms of the new refi program the same as my original loan? V.Braddock – Polk County – Lakeland, FL
Answer: Yes, standard USDA 30 year fix rate term with no early payoff penalty.
Question: Do I need a certain credit score to do this program? R.Santiago – Austin, Texas
Answer: No, on-time mortgage payment history over the last 12 months will be the primary item reviewed. Credit history is not looked at the same as the USDA purchase program.
Question: How much lower will my interest rate be? H.Daniels – Charlotte, NC
Answer: That depends since USDA interest rates change each and every day until locked in. However, the program guidelines require the homeowner’s payment be reduced a minimum of $50.00 per month to meet the benefit policy. USDA 30 year fix interest rates are still near historic low levels, it’s still a great time to look into the refinance program.
Question: Will I be able to skip a mortgage payment when I refinance? H. Clay – Albany, Georgia
Answer: Homeowners will always skip at least one payment after a refinance. However, for closing dates at the beginning of the month, lenders can often times roll in another month of pre-paid interest into the loan. By doing this, homeowners can essentially skip up to two months of mortgage payments.
Question: I heard the USDA approved map (locations that are considered eligible) may be changing. I purchased my home in 2010 and obviously it was USDA eligible at that time. What happens if my house is no longer eligible after the map changes, will I still be able to refinance? K. Henson – Fresno, California
Answer: Yes, you are “grandfathered in” regardless of the rural approved locations (map) change in the future.
Question: I have owned my house now for 15 years and have some equity. I would like to cash out some equity to pay off other debt and to get a new roof, can I do this? T. Phillips – Richmond, Virginia
Answer: No, none of the USDA refinance programs permit “cash out” to pay off other debt or to do home improvements. Borrowers can only refinance into a new USDA loan to lower their current interest rate – known as “rate and term refinance” However, homeowners that have significant equity may be able to switch to a conventional loan and cash out money, contact us below for details.
Question: What about my debt to income ratios? My income went down slightly in recent years, I’m not sure I would qualify. S.Nelson – El Paso, Texas
Answer: Your debt to income (DTI) is not a concern with the USDA Streamline Assist program. Lenders and banks are more concerned with your timely mortgage payments over the past year.
Please contact us with any questions about USDA refinance or purchase loans nationwide. USDA Mortgage Source is a leading USDA rural mortgage resource serving you 7 days a week. Do you need assistance? just call us at Ph: 800-743-7556 or submit the short Info Request Form on this page.