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If it’s time to refinance for lower rates or a shorter term, you have choices with your USDA loan. The streamlined assist refinance program is for those looking to stay in the USDA program. But if you have equity in your home and it makes sense for your situation, you can refinance to a conventional loan.
If you think you can get a better rate on another USDA loan, consider the streamline assistance refinancing program. You don’t need an appraisal on your home or a credit check. However, you can’t use it for a cash-out refinance.
Refinancing your USDA loan to a conventional loan can lead to lower monthly payments, a fixed rate or cashed-out equity to put toward improving your property or other expenses. And if you refinance to a shorter loan term, you may pay your mortgage off faster.
Ask about fees when exploring refinancing options, and keep in mind potential drawbacks for each refinancing type.
Both USDA and conventional refinance programs charge closing costs, which can range from 2% to 5% of the loan amount, depending on the lender. If you refinance your home for $150,000, you could end up paying $7,500 upfront.
When you can refinance your USDA loan differs between the streamlined assist refinancing and conventional refinancing.
To be eligible for a streamlined refinance:
You can refinance your USDA loan to a conventional loan at any time, though most lenders require:
You’ll also need to meet the following borrower requirements:
|USDA streamlined assist refinance||Conventional refinance||Conventional cash-out refinance|
|Minimum credit score||660||620, though 740 or higher is best||620, though lenders prefer 640|
|Maximum DTI||41%||36% but up to 45% with credit score and reserve requirements||45%, higher with six months reserves|
|Income requirements||Varies by region||Not applicable||Not applicable|
Shop around for the lowest rates and fees from multiple lenders before taking on the five steps to refinancing:
Learn whether refinancing to a new USDA loan can get you strong rates, or if changing to a conventional loan better meets your bottom line. To land the best loan you’re eligible for, compare lenders and home loans before you apply.
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