Great News! It’s been difficult for USDA Home Loan NC clients to refinance their mortgage to a lower rate, because of appraisal requirements. USDA recently came out with a new USDA Streamline Refinance that has no Appraisal requirements! So no appraisal, and really no credit, other than you must have on time payments for your mortgage during the last 12 months. This allows USDA Home Loan borrowers who have little to no equity save some money on their housing expenses!
Additionally, USDA Loans now have lower PMI fees than we were required to collect earlier. On October 1, 2016, USDA reduced their up-front guarantee fee from 2.75% to 1.0%
and their annual fee from .50% to .35% for purchasing and refinancing.
USDA doesn’t actually make mortgage loans, they insure them, and write the Underwriting guidelines detailing which loans they will insure. The “PMI” charges are actually called Guarantee fees… But its mortgage insurance, charged and collected by USDA to help in the event a borrower goes into default. You have these fees on any mortgage, and each type calls them something different. We refer to them as USDA PMI fees because most consumers can identify with that term.
USDA Home Loan PMI Fees do not “age” off the loan. Meaning – you will not get a portion of the upfront fee refunded if you move 14 months later. If you live in the property for 17 years, and you’ve built up tons of equity in the home, USDA PMI will still be charged each year.
Here’s the good part about that – the annual USDA PMI Rate will be charged on the Balance at the beginning of that new year. So each year, as you pay your mortgage balance down, the amount of USDA PMI charged will be charged on that lower balance, and will be less from year to year (I’m hoping this makes sense – if not call me and I’ll run an amortization for you to see).
USDA Streamline Refinance 2016 Requirements
Every Bank can require the documentation that makes them feel comfortable with the risk they are assuming for the program. There is a USDA Streamline Refinance that does not require a credit report, however that is in a limited number of states. The program that we offer has the following restrictions:
- Owner occupied properties only. If you’ve moved out of the home, and it is now an Investment Property, you can not refinance with a USDA loan.
- USDA Home Loans will be refinanced to a USDA Home Loan. We can not take a FHA Loan and refinance that to a USDA Home Loan.
- No cash out of the property is available for this program.
- 12 months of paid as agreed mortgage payments
- All original borrowers must remain on the note post-refinance. New borrowers may be added to the loan.
- Credit report is reviewed
- Maximum Loan Amount may include P&I Balance of existing loan, eligible loan closing cost, funds necessary to establish tax and insurance escrow account and the upfront Guarantee Fee.
- Income verification that shows you are under the USDA Maximum Income Eligibility for your area.
- No Home Inspection is required, no appraisal required.
- There must be at least a $50 net reduction is principal, interest, real estate taxes and Homeowners Insurance when compared to the current house payment.
- If the home is NOW out of the USDA Approved areas, but it WAS in the approved areas at the time of the original loan, we can refinance the home.
The USDA Streamline Refinance Program has reduced documentation, does not require an appraisal and is set up to let you get a lower interest rate in the easiest possible way. If you are currently in a USDA and would like to lower your mortgage payment the USDA streamline program can help you take advantage of historically low rates. One of the three USDA Home Loan Programs that we offer allows you to “roll in” your closing costs, or to have a No Closing Costs Mortgage. We will go through the numbers and find the option that is best for you.
One of the BEST advantages to applying for a USDA Streamline Refinance in NC today is how cheap it will be because of the time of year! Taxes and Insurance escrows in NC are collected and paid out in December. By refinancing at this time, you have very little to no escrow payments to make.
Additionally, it is possible that you will miss one or two of your mortgage payments with the USDA Streamline Refinance!!
USDA Streamline Refinance With Divorce
A USDA Guaranteed Loan can be refinanced post-divorce without requiring a new appraisal report. This allows borrowers who owe more on their current mortgage than the house is worth to refinance the house, thus removing their former spouse from title and take advantage of today’s low-interest rates. However, the borrower to the transaction that wants to maintain ownership of the property must meet several additional requirements. These requirements include the following:
- Provide a court ordered divorce decree or separation agreement specifying who is to own the property
- The remaining borrower must be able to qualify for the new mortgage without their former spouses or co-borrowers income when determining the debt-to-income ratio
- If there is any court order child support or alimony needed by the borrower to qualify for the new mortgage, when calculating the debt to income ratio, the borrower must be able to document receipt of twelve payments prior to making a loan application.
The USDA Guaranteed Loan Refinance will still allow for an appraisal report exemption that is available on all USDA Streamline Refinances. When removing a borrower from title because of divorce or legal separation the remaining borrower will not be eligible to take advantage of the USDA Assist Refinance, which means you must pay all closing costs out-of-pocket. In this situation, you can not finance in the closing costs associated with the refinance.
Questions About USDA Streamline Refinance
Will I lose my Mortgage Tax Credit (MCC)?
Based on the NCHFA MCC Program Guide, the MCC is good for the life of the loan as long as the borrower occupies the property as their primary residence or refinances and obtains a reissued Mortgage Credit Certificate. The MCC can be reissued one time if a borrower is refinancing the original mortgage assisted by the MCC. READ: YES, you get to keep your MCC Tax Credit. Just FYI: The MCC in North Carolina is provided by NC Housing (I’ll refer to it here as NCHFA).
Can I do a cash-out or pay off debt as part of my streamline?
No, you can only reduce the interest rate on your current mortgage as part of the streamline. The program requires a net tangible benefit which means you have to lower your monthly payment by at least $50.
Are Interest Rates Higher For This Program?
Today’s mortgage rates are near all-time lows. There are opportunities to refinance and save good money. Plus, with the USDA Streamline Refinance, it’s simple to check your eligibility and get closed on your new, lower-rate mortgage. There are 3 types of Refinances offered by USDA at this time and we will find the program that is the cheapest option for you.
I want to make some improvements to the home, can I borrow more money for a new addition?
No. Additional funds may not be received from the refinance for any reason.
Why do I need to pay for a new title insurance policy?
A lot can change from the time you first purchased the property until the time you apply for the USDA streamline including additional liens on the property that would interfere with the new loan. Title reports reveal liens and other issues with the property. All loans, regardless of the loan type, require an updated title report before a loan can be approved.
I read that this is a Trial or Pilot Program with USDA, Is my State eligible?
The program is currently available in all 50 states.
I make more money now than I did when I bought my home. Should I be concerned? To be eligible for any USDA refinance program, the combined household income must be at or below the maximum income limits set by the USDA. All members of the household will be required to verify their current income, including any working children. If a child or another household member recently got a job, this may also disqualify you from a USDA refinance. The household income is calculated even if those individuals will not be on the mortgage.
This should be a pretty quick process! We just did a comparison for a homeowner who purchased their home in June of 2012 in Johnston County. Their current interest rate is 4.5%. With the lower change in the USDA Guarantee fee they are saving over $130 a month, and we are not having to charge them ANYTHING! So the balance on their mortgage isn’t changing much, and they don’t have to worry about an appraisal… and they get to skip a mortgage payment and lower their house payment by $130 (and change) a month! WHAT A DEAL!
If you want to see if you qualify for the USDA Streamline Refinance Program in NC – call Steve Thorne, USDA Home Loan Expert in NC 919-649-5058. We have the best mortgage rates available, and we know how to work with USDA!