When interest rates are as low as they’ve been, refinancing a USDA loan is quite popular. It’s possible for you to refinance a USDA loan if you already have one, but in order to do so, there are some criteria you must meet.
Steps towards Refinancing a USDA Loan
The first step in qualifying for a USDA loan refinance is simply, you have to have an existing USDA loan. You can’t refinance an FHA loan or Conventional loan into a USDA loan, you must have an existing USDA loan to refinance it into another USDA loan. When refinancing a USDA loan you don’t need to worry about things like an inspection, as it’s not required.
Some other USDA refinancing requirements are;
- Your existing USDA loan must be current
- Your NEW loan must result in a lower monthly payment, including interest
- Your existing loan must be a USDA loan
- No cash-out option is allowed when refinancing a USDA loan
USDA Qualifications and Rates
There actually isn’t a maximum on the loan amount when it comes to USDA loans. The maximum loan amount that you qualify depends on you. Your debt-to-income ratio cannot exceed 30% of your gross monthly income (before taxes) and your grand total debt ratio can’t be more than 40%. So the maximum really depends on your debt ratio and what you can afford. Your total monthly income also has criteria that need to be met before you can qualify for a USDA loan refinance. This criterion varies by area, so be sure to ask your USDA approved lender, and they can help you find that information based on the area for you.
In addition to your debt ratio and income requirements, the maximum amount allowed to be financed is 102% of the appraised value of the home, the USDA will allow up to 102%, but could change without notice, be sure to stay on top of the requirements by talking with a USDA approved lender.
USDA Approved Lenders
It’s important to shop around for your USDA approved lender so you know you’re getting the best lender, options, and rates. The USDA loan program is quite different than other mortgage loans and many of the ins and outs of the approval process can get confusing for traditional loan officers, so it’s important to find a loan officer that specializes in USDA loan programs.