Whenever you hear the word “streamline refinance” you know it is going to be good. A streamlined process usually means that there is less paperwork required and fewer hurdles to cross. This is definitely the case with the USDA Streamline Refinance which has many perks that help you refinance your mortgage into a lower payment, making it more affordable for you. Aside from a lower payment, though, there are many advantages.
No Appraisal Needed
Perhaps the largest benefit of the USDA Streamline Refinance is the lack of need for an appraisal. Without an appraisal, you could knock off a week or two off of the processing time for your appraisal, not to mention the other benefits you will realize. Without an appraisal, you do not have to worry about the value of your home. As the economy continues to try to overcome the housing crisis, some values are not up to where they were before. This would leave many homeowner’s unable to refinance under most programs, but the USDA program is an option. In addition, without the need for an appraisal, you could save several hundred dollars on your closing costs, which can add up in any refinance.
No Credit Report
Another worry many borrowers have is the state of their credit. Without good credit, generally, you are not eligible to refinance. With the streamline USDA loan, however, it does not matter. The lender simply has to verify that you made your last 12 housing payments on time, which can be done without a credit report at all. This means even if your credit score suffered some damage through the years, the lender will not hold you back from refinancing. The savings you gain from the refinance can help you get your credit back on track by paying debts down or off completely.
No Debt-to-Income Ratio Calculations
Another calculation that lenders do not have to do for USDA Streamline loans is the debt-to-income ratio. You do not need to provide proof of your income in order to qualify for this loan, which means the lender cannot calculate your DTI. Because the point behind the streamline refinance is to lower your payment, your DTI will automatically decrease. Since you must have a perfect 12-month housing history to qualify, the lender does not have a lot at risk so they do not have to worry about your DTI.
Save Money with the USDA Streamline Refinance
The entire point of the USDA Streamline Refinance program is to save you money every month. A part of the requirement is that your interest rate decreases by at least 1 point and you must refinance into a 30-year fixed. With that being said, you stand to save several hundred dollars every month, which can be a tremendous benefit for homeowners.
Roll the Funding Fee into the Loan
One drawback of this program might be that you have to pay the funding fee again. The good news is, however, that you can roll that fee right into the loan so that you do not have to pay the cost out of pocket. This can lower the amount of money you must bring to the closing, giving you another benefit to the USDA program.
Basically, if you have a USDA loan right now and you are current on your payments, you can use the USDA Streamline Refinance program. If you are able to save several hundred dollars a month by securing an interest rate that is at least 1% lower than you pay right now, the benefits are written in stone for you. Without a lot of work necessary on the loan, you will not have to wait a long time to get the process going, meaning that you can start saving money right away.
If you are interested in lowering your USDA interest rate, talk to an approved USDA lender in your state. You do not have to use the original lender that wrote the USDA loan that you have now – you can use any USDA approved lender that provides USDA Streamline Refinance loans. In fact, shopping around to find the best rate and lowest closing costs could work to your benefit, saving you even more money in the long run.