If you’ve been in the market for a mortgage lately, you’ve undoubtedly heard a lot of commotion about the recent changes in USDA rates, and are probably wondering what this means for you, a person who is looking to purchase or refinance a home. On May 16, 2016, the USDA recently announced a series of changes that will make it cheaper and faster to refinance a USDA loan. We’re here to break it all down for you.
To begin, it’s important to understand what a USDA loan is. USDA loans are mortgages backed by the US Department of Agriculture as a part of its USDA Rural Development Guaranteed Housing Loan program. USDA loans have increased in popularity over the past few years due to their 100-percent financing program that helps approved lenders provide low to moderate-income households with an opportunity to own a home in a rural or semi-rural area (to buy it, refinance it, build it, rehabilitate it, improve it, or relocate another dwelling) with no down payment, reduced mortgage insurance premiums, and an attractively low monthly interest rate. No, you don’t have to be a farmer to obtain the loan, you just have to meet the following criteria:
- Meet income eligibility
- Agree to personally occupy the dwelling as your primary residence
- Be a US Citizen, US non-citizen national, or qualified alien
- Demonstrate the willingness to meet credit obligations in a timely manner
- Purchase a property that meets all program criteria including location as defined by the USDA
The loans were created in 1991 to encourage homebuyers to live in rural and suburban areas in hopes of boosting the local economies and growth through more affordable housing options. So what do the new changes mean? Nothing but good news for those who qualify!
Starting June 2nd, 2016, homeowners current on their mortgages for the past 12 months will no longer be required to secure an appraisal, provide a credit report, or undergo a debt-to-income calculation when they refinance for a 30-year term, saving applicants both time and money.
Average savings are expected to be around $150 per month, with some borrowers saving up to $600 per month. When it comes to the changes, Rural Housing Service Administrator Tony Hernandez says “These changes reaffirm the Obama Administration’s commitment to middle-class Americans, and I am pleased that we continue to provide affordable housing to support thriving economies in rural communities. Helping homeowners refinance their homes to reduce their monthly payments and take advantage of low-interest rates will bring increased capital to rural residents and the communities where they live and work.”
Interested in seeing if you qualify for a USDA loan or refinance? Contact us today!