USDA Streamline Refinance: Everything You Need To Know
Author:
Victoria ArajJun 23, 2023
•5-minute read
*As of July 6, 2020, Rocket Mortgage® is no longer accepting USDA loan applications.
If you have a U.S. Department of Agriculture (USDA) loan and decide to refinance your home loan, a USDA Streamline Refinance could be a good option. A USDA Streamline gives eligible borrowers an opportunity to take advantage of low interest rates and change to more favorable loan terms, even if the homeowner hasn’t built a lot of equity in their home.
Before deciding whether a USDA Streamline Refinance is right for you, it’s important to understand the requirements, limitations and how they compare to other refinancing options.
What Is A USDA Streamline Refinance?
A USDA Streamline Refinance that allows you to replace your current USDA loan with a new USDA loan, usually to take advantage of lower interest rates. There are several benefits to a USDA Streamline:
- Little to no home equity needed: You can use a USDA Streamline Refinance to do a rate-and-term transaction up to the full value of your property. This means you can use it to take advantage of market conditions if you want to lower your interest rate or change your loan term, even if you haven’t built much equity in your home.
- No appraisal required: Because you’re going from one USDA loan to another, a home appraisal isn’t required in most cases. The only exception is if you received a subsidy as part of getting a direct loan from the USDA before your current refinance.
- No inspection necessary: Because you’re already living in the home, you won’t have to pay for a home inspection either.
- Credit flexibility may be available: The USDA doesn’t set a minimum qualifying credit score, but as a practical matter, it’s harder to get approved with a FICO® Score below a median of 640.
That said, depending on the type of Streamline you’re applying for, a credit check may not be required. It's important to note that USDA policy may also differ from that of an individual lender, so be sure to compare mortgage providers.