USDA Streamline Refinance Program
- USDA Streamline Refinance Program Key Considerations
- Save time and money when you refinance an existing USDA home loan
- Fewer borrower qualification requirements -- no appraisal report, credit report or borrower debt-to-income ratios
- Lower interest rate
- No loan-to-value ratio limit so underwater borrowers are eligible for program
- Borrowers are required to pay up-front and ongoing USDA mortgage insurance fees
- Limited mortgage program options (fixed rate mortgage only)
- Property and loan eligibility requirements
- No cash-out refinancings
- USDA Streamline Refinance Program Overview
- What Lenders Offer the USDA Streamline Refinance Program
- Click on a lender below or INTEREST RATES to contact lenders about the USDA Streamline Refinance Program
- USDA Streamline Refinance Program Eligibility
- USDA Streamline Refinance Program Borrower Qualification Requirements
- Related FREEandCLEAR Resources
The USDA Streamline Refinance Program enables borrowers to refinance an existing USDA home loan with significantly fewer borrower qualification requirements than a standard mortgage refinance. Officially called the USDA Streamlined-Assist Refinance, the program is designed to make it easier for USDA home loan borrowers to refinance into a more affordable mortgage with a lower monthly payment. The main advantages of a USDA Streamline Refinance as compared to a standard mortgage refinance are that the USDA Streamline Program does not require borrowers to obtain a property appraisal report, provide a credit report or meet debt-to-income ratio requirements. Because the program does not require an appraisal, there is no loan-to-value (LTV) ratio limit which means that borrowers who are underwater on their mortgage are eligible for the program. If you are underwater on your home it is usually impossible to refinance your mortgage with standard refinance programs.
By simplifying and streamlining the refinance process, the USDA Streamline Program enables more borrowers to refinance and saves them time and money. For example, eliminating the appraisal and credit report fees saves the borrower hundreds of dollars. Additionally, the USDA Streamline Program does not require that borrowers obtain a property inspection report, which saves borrowers more money. The streamlined application process also enables borrowers to close their refinancing faster. A typical streamline USDA home loan refinance takes less than a month to close as compared to more than a month or potentially longer for a standard mortgage refinance.
The USDA Streamline Refinance Program for guaranteed loans is offered USDA-approved private sector lenders such as banks, mortgage banks and mortgage brokers. The USDA does not promote any particular lender but offers a list of approved lenders as well as a list of USDA Guaranteed Loan Program local contacts on the USDA web site. Borrowers seeking to use the USDA Streamline Program to refinance a direct loan should contact the USDA office in their state.
You can also use the FREEANDCLEAR LENDER DIRECTORY to find lenders in your state that offer the USDA home loan program
We review the key USDA Streamline Refinance Program eligibility guidelines below:
Borrowers must be current on their USDA home loan and not delinquent.
Applicants must have paid their mortgage on-time for twelve consecutive months immediately prior to applying for the USDA Streamline Refinance.
The mortgage being refinanced must be an existing guaranteed or direct USDA home loan on an owner-occupied, single-family primary residence. Properties eligible for the USDA home loan program are located in designated rural areas and small communities.
The interest rate on your new mortgage must be less than or equal to the interest rate on your existing USDA home loan. As an added borrower benefit, USDA interest rates are typically .125% - .500% lower than the mortgage rates for most conventional mortgage programs.
Loan-to-Value (LTV) Ratio
Because the USDA Streamline Refinance Program does not require an appraisal report, there is no maximum loan-to-value (LTV) ratio. This is especially helpful for underwater borrowers as it can be extremely challenging to refinance an underwater mortgage.
Please note that guaranteed USDA home loans do not require an appraisal report while subsidized direct USDA loans do require an appraisal.
The program only permits 30 year fixed rate mortgages. Adjustable rate mortgages (ARMs) and interest only mortgages are not eligible for the program.
Type of Refinance
The USDA Streamline Program does not permit cash-out refinancings. Only rate and term refinancings are allowed.
USDA Mortgage Insurance
Like with the standard USDA Home Loan Program, borrowers are required to pay an up-front and ongoing USDA mortgage insurance premium, also called a guarantee fee. Similar to private mortgage insurance (PMI) for conventional mortgages and the FHA mortgage insurance premium (MIP) for FHA mortgages, the ongoing USDA mortgage insurance premium is an additional cost to borrowers on top of their monthly mortgage payment. USDA mortgage insurance protects lenders in the event that borrowers default on their loan. As of October 1, 2016, the up-front USDA insurance fee is 1.0% of the mortgage amount and the ongoing insurance fee is 0.35% of the mortgage amount.
There is no prepayment penalty on USDA home loans.
For properties located in federally-designated flood zones, borrowers are required to obtain flood insurance.
As outlined below, the USDA Streamline Refinance Program has fewer borrower qualification requirements as compared to a standard mortgage refinance.
Borrower Credit Score
Applicants are not required to submit a credit report or score making the program ideal for borrowers who have experienced a drop in their credit score. Usually borrowers with lower credit scores pay a higher mortgage rate but this does not apply to the USDA Streamline Program.
Borrower Debt-to-Income Ratio
The program does not apply a maximum borrower debt-to-income ratio which helps borrowers who have experienced a decrease in their monthly income or increase in monthly debt expense. Not applying a debt-to-income ratio means more borrowers can qualify for a Streamline USDA Refinance.
Ability to Repay Loan
Although the USDA Streamline Program does not require a credit report or apply a borrower debt-to-income ratio limit, lenders are required to verify that borrowers have the financial ability to repay the loan. This is usually accomplished by reviewing the borrower’s on-time payment history and applying guidelines similar to the Qualified Mortgage (QM) criteria to ensure that borrowers can afford and repay their mortgage.
Because the program does not use borrower debt-to-income ratios, borrower income limits also do not apply. This feature may be helpful for borrowers whose income has increased since they obtained their original mortgage as the standard USDA home purchase and refinancing programs apply maximum borrower income limits.