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A guide to USDA streamlined refinance loans

Yahoo Personal Finance· Getty Images
E. Napoletano
·Contributor
Updated 6 min read

If you have a mortgage backed by the U.S. Department of Agriculture (USDA), you’re in luck: You may be able to refinance your loan — without jumping through countless hoops. Using a USDA streamlined refinance, qualified loan holders can access a lower interest rate and skip usual refinancing steps like a new appraisal.

So, can you streamline refinance a USDA loan? The answer is yes, and you have two options: the standard streamlined refinance and the new streamlined assist refinance. Your next step is to determine which option best suits your current loan and finances.

Read more: Is it time to refinance your mortgage? 5 ways to prepare.

In this article:

A USDA streamlined refinance is a mortgage refinancing option backed by the USDA and reserved exclusively for current holders of USDA-backed mortgages. Available in all 50 U.S. states, these refinances hold three distinct advantages over many everyday refinancing loans, giving USDA borrowers an edge:

  • No equity required. Both streamlined USDA refinance loans have maximum loan-to-value (LTV) ratios of 100%.

  • No home appraisal or inspection required. Fewer hurdles could reduce surprises on the way to the closing table.

  • Ability to finance closing costs and UDSA fees. Save on out-of-pocket costs by rolling the closing costs and USDA fees (up-front and annual guarantee fees) into your new mortgage.

These refinances are rate-and-term refinances that give you a lower interest rate with a new mortgage. In other words, these USDA refinances aren’t cash-out refinances that let you tap into your home’s equity.

The benefit of a streamlined refinance USDA loan is that it is designed for low-to-middle-income borrowers with property in rural areas. It breaks down many application process barriers that non-USDA loan holders may have to endure to refinance a property, including those noted above. Also, it has more flexible credit score guidelines. While a credit score of 620 may be standard with many USDA lenders, those with lower scores can still have a refinance approved through manual underwriting.

Learn more: Best USDA lenders

Since you now know that you can roll your USDA fees into your new mortgage, it would help to know what those fees are. The USDA charges two separate fees when you close on a streamlined refinance loan:

  • Up-front guarantee fee. This USDA guarantee fee equals 1% of your total loan at closing. For example, a $100,000 streamlined refinance loan would have a $1,000 up-front fee.

  • Annual guarantee fee. You’ll pay this fee annually, totaling 0.35% of your outstanding loan balance. To help ease finances, it’s divided across your monthly payments throughout the year.

USDA home loans will also typically have closing costs, which vary by mortgage lender. These fees commonly include mortgage origination and processing fees, notary fees, and other costs. Your lender can provide you with a complete cost breakdown. If they don’t, be sure to ask.

Learn more: What is mortgage insurance?

Here’s the scoop: There are two types of USDA streamlined refinance loans — the standard streamlined and streamlined assist. To be eligible for either, you’ll need to meet three criteria set forth by the USDA:

  1. An existing USDA-backed mortgage (direct or guaranteed)

  2. Have held your USDA mortgage for at least 12 months

  3. A history of on-time mortgage payments, either six (standard) or 12 months (assist)

Each streamlined refinance option works differently, so it helps to consider both to make a more informed decision about refinancing your existing USDA loan.

Best for: Those with good credit who want to refinance to a lower monthly mortgage payment or rate

Income/credit check: Required

To qualify for the standard streamlined USDA refinance, you must show that you’ve paid your current USDA loan on time for six months. You’ll also be required to complete an income and credit score verification.

Luckily, USDA loans don’t come with hard-and-fast minimum credit scores. Even though many lenders like to see a minimum score of 620, you aren’t out of the running if you come in with a lower score. Instead of going through the automated underwriting process, those with lower scores undergo a manual review and may still qualify for refinancing.

This mortgage refinance option gives borrowers whose families might have changed a bit of flexibility. You can add or remove borrowers, a plus if you’ve married or divorced since taking out your original USDA loan.

Best for: Those with lower credit scores and income

Income/credit check: Not required

The streamlined assist refinance is the newest of the USDA’s refinance products. This refinance option launched in 2012 in 34 states but is now available in all 50. Unlike the option above, the assist refinance option doesn’t require a credit check or income verification — a bonus if you want to refinance but have a low credit score.

Three other differences between the assist and the standard streamlined refinance options are worth noting. First, you’ll need to show that you’ve paid your mortgage as agreed for the 12 months prior to your refinance application. Next, this refinance option also allows you to add borrowers, but you can only remove borrowers from the mortgage if a borrower is deceased. Finally, the assist loan needs to actually save you money. Your new monthly payment must show a $50 savings over your current payment, including principal, interest, taxes, and homeowners insurance (PITI).

Read more: How soon can you refinance a mortgage after buying a home?

Just like with any mortgage, rates for USDA streamlined refinance loans will fluctuate with the market. As of June 1, 2024, the interest rate on a USDA direct loan is 4.75% for those who qualify as low-to-very-low-income borrowers. If you qualify for payment assistance, you could score an even lower rate — as low as 1%.

Since rates change frequently, your best bet to find the current rates on USDA streamlined refinance or USDA streamlined assist refinance loans is to connect with a USDA-approved lender.

Learn more: 5 strategies to get the lowest mortgage rates possible

Absolutely. The USDA offers two streamlined refinance options that don’t require a home appraisal or inspection. The standard streamlined refinance requires a credit score and income check; the streamlined assist refinance loan program does not. There is no cash-out refinance option with USDA loans, though.

Yes, just as there is an FHA streamline and VA streamline refinance, you can streamline refinance your USDA loan. The USDA offers two key refinance options: the standard USDA streamlined refinance and the USDA streamlined assist refinance. The standard option requires income and credit score verification, while the assist option does not.

The USDA doesn’t have an established minimum credit score for its mortgages or refinance loan products. If your credit score falls below the 620 to 640 range, you must provide a letter explaining the circumstances that created your low score, such as falling behind on or missing bill payments.

This article was edited by Laura Grace Tarpley