USDA has a little known, unique refinance product called the USDA Pilot Refinance Program. This program is available to borrowers that currently have a USDA guaranteed loan and are looking to lower their rate and payment through a refinance. The USDA Pilot Refinance program allows for a borrower to refinance without an appraisal through a streamlined process for a lower monthly payment.
Closing costs can be included in the new loan so that the borrower brings little or no money to closing. With rates as low as they are right now, borrowers that obtained a USDA Rural Development mortgage loan during the 2nd half of 2013 or in 2014 may benefit from a refinance through USDA.
A sampling of the requirements or restrictions of the USDA Pilot Program are:
- Must be a primary residence
- Only a 30 year fixed rate is available
- Must document household income to verify that it is under the maximum limits for the county in which the property is located
- The home must be in a qualified state for the Pilot Program. See below for allowed states
- The last 12 monthly mortgage payments must have been on time
- No property inspections
- The new interest rate must be at least 1% lower than the current rate
- Borrowers may not be removed from the loan except in the case of the death of a borrower
- The new loan amount may include the principal loan balance, accrued interest, eligible closing costs, pre-paids, lender fees, escrow account establishment, and the up-front USDA funding fee
- No cash out is allowed