USDA Rural Housing Refinance – Features and guidelines

by Inlanta Madison on March 15, 2011 · 0 comments

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We get this questions a lot; “Can I refinance into a USDA Rural Housing loan?” and the answer, 9 out of 10 times, is no. Unless your current loan is a Guaranteed Rural Housing loan or a USDA Section 502 Direct loan, you cannot refinance into the program.

If you have a USDA loan now, you can refinance with or without an appraisal. See below for additional USDA refinance information.

Features and guidelines for a USDA Rural Housing refinance:

  • Your current loan must be secured by the same property as the original loan.
  • The original loan must be Guaranteed Rural Housing (GRH) or USDA Section 502 Direct only. This Program may not be used to refinance FHA, VA, or other government or conventional mortgages.
  • 30 Year Fixed rate only
  • The interest rate of the new loan cannot exceed the interest rate of the loan being refinanced.
  • Owner Occupied principal residence only
  • The guarantee fee is 2%**
  • The annual fee is 0.5%
  • Income limits apply and can be viewed from our USDA Rural Housing program page of our site.
  • Refinance loans are permitted for properties in areas that have been determined to be non-rural since the existing loan was made.
  • Escrows required
  • Appraisal is required unless the refinance loan amount includes only the unpaid principal balance with or without the 2% guarantee fee.
  • If an appraisal is done then the maximum loan amount cannot exceed the balance of the loan being refinanced (excluding unpaid fees), plus the guarantee fee, and closing costs, including funds necessary to establish a new escrow account.
  • Additional borrowers may be added to the new loan or existing borrowers may be deleted from the current loan. All applicants must meet all eligibility requirements.

**The  2% guarantee fee may be financed into any GRH refinancing transaction. You may finance other closing costs and fees up to 100% of the current appraised value. However, it is possible for the loan-to-value (LTV) of the new loan to reach 102% if the 2% guarantee fee is financed. Loans may exceed 100% LTV only to the extent that the excess represents a financed guarantee fee of no more than 2%.

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