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There are many homeowners out there with USDA home loans. USDA loans offer many great benefits to home buyers in rural markets, including competitive mortgage rates, no-down-payment loan options (100% financing), and more. There may come a time when you want to refinance your USDA loan, especially if you qualify for a lower interest rate than before. You may also have built up some good home equity and could be interested in cashing out some of that for other expenses like paying off debts or making home improvements.See How Easy it is to Get Your Custom Rate!
Here are some of the key things you need to know about USDA home loan refinancing:
Can I Refinance a USDA Loan?
Yes, a USDA loan can be refinanced just like any other type of mortgage. You will apply for a refinance loan with a USDA-approved mortgage lender and they will review your financial information just like before. If your finances are in better shape now, it could work to your advantage. You might have a higher income, higher credit score and/or lower debt. You may also have some home equity that will provide more lending leverage. A USDA loan can be refinanced with another USDA mortgage loan or be converted into another loan type, such as an FHA loan or conventional mortgage.
Can I Cash-Out Refinance a USDA Loan?
No, the United States Department of Agriculture (USDA) does not provide a cash-out refinancing mortgage solution. However, that does not mean you aren’t able to tap into your home equity. You can apply for a different type of cash-out refinance loan or a home equity loan. If you need to access your equity and turn it into cash for other important expenses, you will still have options as a USDA homeowner.
Conventional Cash-Out Refinancing
USDA loans are often great for home buyers who may not qualify for other types of mortgage loans. The good news is that your financial situation is likely improving the longer you own your property. This is assuming you are current with your mortgage payments, property taxes, etc. You might also be in better shape in terms of your income and FICO score. These financial improvements can work in your favor when refinancing your USDA loan. You could qualify for a conventional mortgage loan with a lower fixed mortgage rate. This may end up being a better financing solution in the long run, and can allow you to cash out some of your home equity now.
FHA Cash-Out Refinancing
USDA homeowners who have good home equity, but may not have as strong a financial standing, could still qualify for an FHA cash-out refinance loan. FHA loans are backed by the Federal Housing Administration and provide lending opportunities to home buyers who may not be eligible for other mortgage loan types. You could be able to refinance your USDA loan with an FHA loan, while also taking out some cash from your equity.
VA Cash-Out Refinancing
VA loans offer many similar benefits as USDA loans, including 100% financing options and competitive mortgage rates. They are only available to people with eligible military backgrounds. If you are a veteran, active-duty service member or surviving spouse, you may be able to qualify for a VA cash-out refinance loan. VA refinancing can allow for cashing out home equity. Talk with a VA-approved mortgage lender to see if you qualify and if this refinancing solution is right for you.
Home Equity Loan
You may want to keep your USDA as it is. Or, you may not qualify for another type of cash-out refinancing option. In this case, you may want to consider a home equity loan. Home equity loans are also known as “second mortgages” because they are separate from standard mortgage loans. Your existing USDA mortgage loan would stay intact and you would get a secondary home equity loan that allows you to borrow from your earned equity. The interest rates will generally be higher than with cash-out refinancing solutions, but it may be your best way to access your equity.
Home Equity Line of Credit (HELOC)
Another secondary loan option is a HELOC. This is similar to a home equity loan because it will be separate from your primary mortgage. However, this solution gives you a line of credit based on your home equity—rather than one lump sum loan like a home equity loan. You can pull out money only as you need it. Home equity lines of credit are great for USDA homeowners who are looking to invest in home improvements. You can cash out what you need when necessary, and then have relatively flexible payback options.
USDA Streamline Refinance
The USDA does offer its Streamline Refinance program for homeowners who have little-to-no home equity, but want to refinance their current loan. This could be an option if you are able to qualify for a lower mortgage rate or a home refinance will help you in some other ways financially. It does not allow for cashing out of any equity. It is simply a mortgage refinance program for USDA homeowners.
If you have a USDA loan in the Atlanta area and are interested in refinancing your mortgage—whether you are cashing out equity or not—contact Moreira Team today. Let us help you figure out the right lending solution based on your specific situation.See How Easy it is to Get Your Custom Rate!