USDA loans have been the darling of The First Time Home Buyer market over the past few years. They have been perfect for first time home buyers who income and credit qualify because they allow a buyer to purchase a home with no down payment even if they were never in the military.
That said, because they were 100% financing loans anyone who purchase with a USDA loan in the past 5 years or more is probably underwater with the drop in property values. Since USDA loans do not fall under HARP many people have been told they are stuck in the higher rates they had from when they purchased their home.
This is a myth! If you have a USDA loan and are in good standing you can refinance that loan and get rates these days in the high 3s to low 4s, if your credit and income are still fine. Please know, you must qualify and be able to pay the loan back under today?s government underwriting standards but you do not usually have to be concerned with the appraised value of your home. Another key rule is that you will not be allowed to do the refinance unless you are going to drop by at least 1 percentage point in rate. Example would be if you have a 5% rate today you must qualify to receive a 4% or lower rate to get the mortgage.
USDA just like VA and FHA agree that they are better off ?helping you to get a lower rate on your government?guaranteed?mortgage. This is because if your payment can drop you are more likely to be able to stay finacially?healthy. Stay above water yourself and not default on the debt they are?guaranteeing.
Key to note here is that if you do not have any equity in your home you will not be able to take cash out of your home but that makes sense. No equity no cash. That is not such a bad thing if you are saving an extra $100.00 or more per month on your home!
Wishing you all the best,
Don LaPlume
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Filed under: No Appraisal Needed Refi, USDA RD Mortgages
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