Your Guide to USDA Refinancing
What Is USDA Refinancing?
Support for existing USDA loan holders
USDA refinancing is designed to help borrowers who currently have a USDA loan restructure their mortgage.
Affordable down payment options
Like USDA purchase loans, you don’t need a down payment to refinance. This offers an accessible option to homeowners without savings.
100% refinancing
USDA refinancing allows borrowers to refinance up to 100% of their current loan balance, which is ideal for those without a lot of equity in their property.
What Can USDA Refinancing Be Used For?
A primary residence
USDA refinancing can be used for a borrower’s primary residence. Investment properties, vacation homes, and secondary residences are not eligible.
In a designated rural or suburban area
To qualify, the property must also be located in a designated rural or suburban area. This may include small towns, open country, and city outskirts.
After 12 months of ownership
Homeowners must have held their current USDA loan for a minimum of 12 months to be approved.
Pros
- Affordable refinancing options for rural homeowners
- No equity or appraisal required with streamlined option
- Borrowers can still refinance if they're underwater
Cons
- Requires an upfront guarantee fee
- Limited to properties in specific areas
- Can only be used for a primary residence
- Cash-out refinancing is not available
Talk to our mortgage experts today about finding the right loan for you.
Alternatives to USDA Refinancing
- Flexible qualification requirements
- Refinance with limited home equity
- Has fixed-rate and cash-out refinancing options
- Ideal for borrowers who don’t meet USDA requirements
- No geographic restrictions on property location
- Offers a variety of loan structures and terms
- Ideal for those who qualify for other loans and want to eliminate USDA fees
- Available to eligible military Veterans, service members, and spouses
- Offers competitive interest rates
- No private mortgage insurance (PMI) requirements
- Includes streamlined and cash-out refinancing options
How Do I Know If USDA Refinancing Is Right for Me?
You currently live in a USDA-eligible region
USDA refinancing is only available for properties in rural or suburban areas that meet the program's eligibility criteria.
You have an existing USDA loan
This program is also limited to current USDA loan holders and cannot be used to refinance other mortgages.
You’re facing financial hardship
The USDA Streamlined Assist Refinance program can help you save $50 a month ($600 per year) or more with no property appraisal or max loan amount.
When Is the Best Time to Use USDA Refinancing?
The best time to use USDA refinancing is when you’re growing your family, changing careers, or you’ve improved your financial profile. This program can help make your mortgage payment more manageable and free up money for important expenses, like childcare, education, and other major costs. If you’ve paid off debts or improved your credit, refinancing with a USDA loan can also help you secure more favorable terms than you have with your current mortgage.
Get In Touch With A Loan Officer Today
FAQ
Can I refinance a non-USDA loan with the USDA refinancing program?
Is there a limit on how many times I can refinance with a USDA loan?
There’s technically no limit on the number of times you can refinance with the USDA, but each refinance still has to meet eligibility rules. For instance, your property must remain in an eligible area (unless it’s grandfathered in), and you must demonstrate that refinancing will provide you with a tangible benefit, like more manageable monthly payments.
While multiple refinances are possible, it’s important to consider the benefits of refinancing versus closing costs, administrative fees, and other expenses. You want to make sure that each refinance is congruent with your long-term financial goals.
What if my home was in a USDA-eligible area when I first bought it but is no longer classified as rural?
If your property was originally financed with a USDA loan, and the classification of your area has changed since, you will likely still be able to refinance. The program allows for “grandfathering,” meaning if your home was in an eligible area at the time of purchase, you won’t be penalized because the area’s status has been updated. You’ll need to meet other program requirements, like income limits and primary residence guidelines, but the updated rural designation alone shouldn’t prevent you from refinancing.
How does my household size affect my eligibility or loan amount for a USDA refinance?
USDA loans have specific income limits that vary based on household size and location. Generally, the more people in your household, the higher your allowable income threshold. When refinancing, you’ll need to make sure you still fall within these parameters.
Additionally, your household size can influence your debt-to-income ratio, particularly if you’re the only earner or if you have dependents. If your household has changed since you first took out the loan, you’ll need to report the new number of people living in your home when you refinance. This helps you avoid surprises during underwriting and obtain the best possible terms.
Ready to Go?
Apply Now
Have Questions?
Get Them Answered
Borrowing Is Better with NYFTY Lending
Find Your Loan Officer Today
Connect with a loan expert near you to get started.
