Is A USDA Streamline Assist Refinance Right For You?

If you took out a USDA loan and are looking for ways to save money on your mortgage, you’ve probably considered refinancing. One option you might look into is the USDA streamline assist refinance, which is an option that’s only available to USDA borrowers.

As of July 6, 2020, Rocket Mortgage^® no longer accepts USDA loan applications. But we want to help you find the best deal when refinancing your mortgage. So let’s look at how the USDA streamline assist refinance works as well as the benefits of going this route.

What Is A USDA Streamline Assist Refinance?

A USDA streamline assist refinance is a mortgage refinancing option for USDA home loan borrowers. If you previously purchased your home through the USDA, you can refinance to lower your interest rate and payments.

This program is available to rural or suburban homeowners who purchased their homes with a USDA home loan. The home you’re refinancing must be your primary residence, and you need to have made at least 12 consecutive mortgage payments.

The refinance must reduce your principal, interest, real estate taxes and homeowners insurance by at least $50 and the new loan terms cannot exceed 30 years.

USDA Streamline Refinance Vs. Streamline Assist

The USDA also offers a standard streamline refinance program for current borrowers. Let’s look at an overview of how that program works and how it compares to the USDA streamline assist refinance.

What Is A Standard USDA Streamline Refinance?

With the standard USDA streamline refinance, you refinance your current USDA loan into a new mortgage. When you do this, you can add or remove a borrower from the new mortgage.

The process is quicker than other refinancing programs, and borrowers typically don’t have to go through an appraisal and closing costs can be rolled into the new loan. However, you will have to show your lender your credit score and debt-to-income ratio (DTI) to qualify.

The Difference

Here is an overview of some of the biggest differences between the standard streamline refinance and the streamline assist refinance programs:

• Credit score: You’ll be required to undergo a credit check before taking out a streamline refinance. This is not a requirement with the streamline assist refinance.

• Debt-to-income ratio: You’ll also have to provide your current debt-to-income ratio before taking out a streamline refinance loan, but not with the streamline assist refinance.

• Adding/removing borrowers from mortgage: One advantage of the standard streamline refinance is the borrowers can add or remove someone from the mortgage at closing. You can still add someone to the mortgage with the streamline assist refinance, but can only remove a person if the borrower has died.

• Payment history: With the standard streamline refinance, you need to show a history of on-time payments over the last 180 days. On the streamline assist refinance, you need to show 12 months of consecutive, on-time payments.

USDA Streamline Assist Refinance Guidelines

Here are the current USDA streamline assist refinance guidelines and eligibility requirements:

• Must have an existing USDA loan
• Primary residence only
• Must have a history of 12 consecutive on-time payments
• Monthly payment reduction of at least $50
• Debt-to-income ratio (DTI) not required
• No appraisal required
• Minimum 620 credit score
• Additional borrowers can be added to the loan

What Are The Benefits?

There are quite a few advantages to taking out a USDA streamline assist refinance if you meet the eligibility requirements. One of the biggest benefits is that there’s no appraisal required, which will eliminate some of your out-of-pocket costs.

The eligibility requirements are less strict than what you’d find with a standard refinance. Borrowers don’t have to show their debt-to-income ratio, undergo a credit check or provide any income documentation.

Plus, these loans tend to come with lower rates. You’ll only be approved for the loan if it results in a savings of at least $50 per month, so you’re guaranteed to save money on the new loan.

How Much Does This Cost?

Any time you refinance, closing costs are going to be one of the most significant expenses you incur. These typically cost around 2% – 6% of the entire mortgage. However, the USDA does allow you to roll these costs in with your mortgage, so you don’t have to pay them out of pocket.

And you won’t have to pay for a new credit check or home appraisal, which will save you some money. But you will have to pay a new guarantee fee, which will cost about 1% of the total loan amount. And the USDA charges an annual fee of 0.35% of the total loan.

Where To Find A Lender That Offers This Program

If you’re interested in applying for a streamline assist refinance, your next step is to find a lender that offers this program. Rocket Mortgage does not currently participate in the program, but there may be local and national banks that specialize in it. You can start by checking out this list of USDA-approved lenders.

The Bottom Line

The USDA streamline assist refinance is a good option for current USDA borrowers trying to save money on their mortgage. The application process is simple, and you won’t have to undergo a credit check or provide any income verification.

Just make sure you do your homework so you can find the refinancing options that fit your needs and budget. With Rocket Mortgage, you’ll receive expert advice that is unique and customizable to your financial situation. Get started online today.