(USDA Section 502 Guaranteed loans) allowing homeowners to include closing costs and other settlement charges into a lower rate USDA mortgage with streamlined guidelines making it easier to refinance to a lower interest rate and payment. USDA mortgages offer buyers the ability to finance 100% of the purchase price when purchasing a primary residence but now USDA is making it much easier to refinance these USDA mortgages so homeowners can take advantage of today’s low fixed mortgage rates.
Effective June 22, 2012 Primelending began accepting the USDA Rural Housing Refinance Pilot Program and the financing of the principal balance of the existing USDA loan plus the accrued interest used to calculate the payoff, and any eligible closing costs. The two year pilot refinancing program is available to homeowners with USDA mortgages in 19 eligible states including Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky Michigan, Mississippi, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, and Tennessee. But, if a borrower with a USDA loan in any of the other 31 states is looking to refinance, there is still a USDA streamline refinance that does not require an appraisal but it cannot finance the closing costs like the Pilot Refinance Program.
The USDA Pilot refinance program is available to help homeowners with a USDA mortgage refinance at a lower interest rate without an appraisal, inspection, or calculating debt to income ratios as long as the property is still in an eligible area and the household is under the USDA income limit for the county in which the property is located. With the new USDA refinance guidelines, it provides a less restrictive form of refinancing to save money.
PrimeLending is one of the leading USDA lenders in the country and the Russell Smith team is one of the top producing USDA loan officers as well and both have extensive experience in USDA Rural Housing Mortgage Loans.
The USDA Rural Development Pilot refinance program guidelines include the following:
- The interest rate on the new USDA loan must be a minimum or 1.00% lower than the existing USDA loan
- Pilot eligible states include AL, AZ, CA, FL, GA, IL, IN, KY, MI, MS, NV, NJ, NM, NC, OH, OR, RI, SC, & TN. All other states are ineligible
- Rural Refinance Pilot loans must meet basic eligibility: Property must be in a USDA eligible area and the household income must be under the USDA county income limit
- New term of the refinance loan must be 30 years
- Upfront USDA Guarantee fee is 2.00% of the loan amount which can be financed on top of the base loan amount
- Annual fee of 0..40%. This would be new for most USDA borrowers since this is fairly new for USDA guaranteed loans. This fee is paid monthly in the payment. For example: $100,000 loan would be $30 per month. $100,000 x .40% / 12 = $30..00
- New USDA loan refinance loan may include the principal balance of the existing USDA guaranteed loan plus accrued interest through the payoff date, and any eligible closing costs
- No cash out is permitted
- Reasonable and customary closing costs and other fees may be collected from the borrower by the originating company
- Income verification for all adult household members is required for income eligibility determination only, not for determining repayment ability
- Ratio waivers are not required as income is just used for compliance income calculation only for verifying the income is under the county USDA household income limit
To apply for the Kentucky USDA Pilot Refinance Program, click here.
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