What Is a USDA Streamline Refinance and How Does It Work?

A USDA streamline refinance can replace your existing USDA mortgage with one that offers better rates.

USDA streamline refinances are a low-requirement refinance option for those with existing USDA loans. These types of refinances can be ideal for homeowners looking to lower their monthly mortgage payments. Explore how these loans work and decide if one is right for you.

What Is a USDA Streamline Refinance?

Offered through the U.S. Department of Agriculture (USDA) and private lenders like Freedom Mortgage, USDA streamline refinances are loans that replace existing USDA loans to lower monthly mortgage payments. Typically, USDA streamline refinances can be completed with no new home appraisal and with few financial requirements.

USDA Streamline Refinance vs. Conventional Refinance

USDA streamline refinance and conventional refinance both allow you to replace your current loan with a new loan that often has different terms. However, there are some key differences:

How Does a USDA Streamline Refinance Work?

USDA streamline refinance loans are available to current USDA loan holders and can offer both lower interest rates and a better loan term to homeowners in good standing. This usually means they're up to date on their existing loan and have made no late payments within the previous six-month period.

Like any other loan type, USDA streamline refinances have some specific requirements for eligibility.

USDA Streamline Refinance Eligibility Requirements

Homeowners must meet a set of requirements for approval on a USDA streamline refinance. These requirements vary by lender, but here's what they look like with Freedom Mortgage:

• Current loan status: To qualify for a USDA streamline refinance, you must have an existing USDA loan. Your payments must be current, and there can be no late payments within the last six months. Your loan also must be at least one year old.
• Financial requirements: Visit the USDA website to check your income eligibility. In some cases, there are certain credit and debt-to-income ratio (DTI) requirements to qualify.
• Refinancing benefits: A USDA streamline refinance must cause a net reduction in the size of your monthly mortgage payments.
• Occupancy: The home being refinanced must be your primary residence.

USDA Streamline Refinance Benefits and Considerations

When thinking about whether a USDA streamline refinance is right for you, consider how it often stands apart from conventional refinance options:

• Less rigid financial requirements
• Simple and efficient application and processing times
• No home appraisal requirement (in most cases), saving time and money

Be sure to consider the closing costs and guarantee fees that also come along with a USDA streamline refinance. It may be possible to have these costs rolled into the loan cost if need be.

How To Apply for a USDA Streamline Refinance

The process to apply for a USDA streamline refinance typically involves the following:

• Apply for a USDA streamline refinance for the amount needed to pay off your current USDA loan.
• The lender reviews the application, and if you qualify, the loan is approved. This type of refinance usually has a quick and efficient processing time. With simplified documentation, streamlined underwriting, and no home appraisal typically required, some loans can close in 30 days or less.

USDA Streamline Refinance: Get Started Today

If you have an existing USDA loan and are interested in benefits such as reduced interest rates and lower monthly payments, a USDA streamline refinance could be a great choice for you.