Have you ever heard of a streamline refinance? They are among the quickest loans to close because they have very few qualifying requirements in order to refinance the loan. The good news is that the USDA is among the programs that offer this streamlined process. The USDA Streamline Refinance can usually be completed within 3 weeks from start to finish.
The Qualifying Requirements
So how do you qualify for a streamline program with the USDA? The guidelines are simple:
- You must have lived in the home you plan to refinance as well as plan to live it in after refinancing
- Your current loan must be a USDA Direct or USDA Guaranteed Home Loan
- Your last 12 mortgage payments must have been made on time
If you meet these three requirements, you probably qualify for the USDA Streamline Refinance. The best news is that you do not need to prove your credit score or have a new appraisal completed on the property.
Because a credit report is not required, you can prove that your mortgage payments were made on time in a variety of ways. If the lender decides to use your credit report to verify this information, only the housing history will be reviewed; everything else is null and void. If the credit report is not used, the lender can ask for a Verification of Mortgage, which is a document completed by the current loan servicer that shows the timeliness of the mortgage payments for the last 12 months.
If a credit report is used, the USDA does not look at any other part of the report, which means that if there is any negative credit information reporting, an explanation will not be necessary from the borrower.
Upside Down Homeowners
Perhaps the best news for homeowners in today’s economy is the fact that you can be upside down on your home and still refinance with this program. Because you do not need a new appraisal, the lender does not have to worry if you owe more than the home is worth. You can lower your interest rate with this program, which means you pay less interest and more principal, which will give you a better chance at getting ahead of the value of the home.
The New Terms for the USDA Streamline Refinance
The terms of the USDA Streamline Refinance must meet the following requirements in order to qualify:
- The interest rate must be fixed
- The term of the loan must be 30 years
- The new principal, interest, taxes, and insurance must be at least $50 less than the current payment
The new loan amount for this loan can equal the outstanding principal of the original loan plus any of the following: upfront guarantee fee, outstanding interest, and closing costs.
As the USDA eligible properties change with each census tract, you might find that your property is no longer located within the rural boundaries. If you currently have a USDA home loan, however, you are eligible to refinance into the streamline program for the USDA loan regardless of the property’s location as long as you use a USDA approved lender.
The USDA Streamline Refinance program started as a pilot program in 2012 to see if any borrowers would use the program as well as to iron out any issues with it. Today, there are more than 34 states that are eligible for the program. The borrowers that are eligible stand to save up to 35% on their monthly mortgage payment, which makes this program well worth looking into if you have a USDA loan.