Do I Qualify For A USDA Mortgage To Refinance My Home?
The answer to this question is no, unless you are already a USDA mortgage holder. Those who already hold a USDA mortgage can qualify very easily for a streamline refinance. Refinancing is available at a fixed rate and the rate on the refinance will have to be lower than the rate you are currently paying. Any non-USDA borrowers must use conventional refinancing, or can try a VA or FHA refinance program.
USDA offers a streamline refinance to their current borrowers. This is a simple and quick way to get your mortgage refinanced as there is no property inspection required to do a USDA streamline refinance.
Requirements For A USDA Refinance
- The mortgage to be refinanced has to already be a USDA Loan
- The mortgage must not be delinquent at the time of refinancing
- The refinance must result in the borrowers monthly principal and interest payment being lowered
- No cash out will be allowed on a USDA refinance
The maximum amount that can be refinanced depends on a couple of factors. There is no maximum loan amount in regards to the amount of the mortgage itself. The maximum amount of the mortgage you can obtain all depends on your debt ratio. The mortgage payment you qualify for will have to be no more than 29 percent of your gross monthly income. Your total debts must also not exceed 41 percent of your monthly gross income. Your total monthly income must also be within the USDA maximum allowable income limits for your area. This is a number that varies depending on where you are located. You can find the actual maximum allowable income for any area by visiting the USDA section of the Rural Development Housing and Community Facilities Program website.
The other factor in determining how much can be refinanced has to do with the maximum amount of financing that is allowed for a USDA mortgage. The maximum that is allowed to be financed is 102 percent of the appraised value of the home. The extra 2 percent that is allowed to be built into the loan is actually a one time USDA loan guarantee that is charged to the direct lender. When refinancing this fee will only be .5 percent, and the maximum loan amount will actually be based on the loan balance at the time of the refinance, since there is no cash out allowed on a USDA streamline refinance.
USDA loans require no down payment and there is no pre-payment penalty on any USDA mortgages. USDA loans are only available for homes in rural areas. An eligible rural area can be determined by one of the 800 USDA Rural Development field offices. Generally, however, a rural area is defined as open country and places with a population of 10,000 or less. There are also certain areas that can be considered rural areas where the population can be between 10,000 to 25,000 if they meet certain conditions.
Since part of qualifying for a USDA mortgage refinance is that your new monthly payment must be lower than your original payment, this could present a good option if you are trying to find some extra spending money each month. With interest rates at the lowest they have ever been, you may be able to save a decent amount of money each month by refinancing at a lower rate.
Rob K. Blake, refinance expert and author, educates mortgage shoppers on finding local providers by state like Georgia Mortgage Brokers and Lenders and provides reviews of national companies like Accredited Home Lenders.