Wed, Feb 15, 2012
When rates drop, most home owners look to lowering their interest rate on their mortgage loan, saving them money monthly. A Rural Development Loan is no different.
Rural Development guidelines do allow for a home to be refinanced into a Rural Development Loan in order to get a lower rate, but the loan must currently be a Rural Development Loan to qualify.
Two options that are available to refinance a Rural Development Loan are: A Streamline Loan that does not require an appraisal and a full refinance that will require an appraisal.
A streamline refinance loan with Rural Development will take the current unpaid mortgage principal balance only plus the 1.5% Guarantee Fee to generate your new loan amount. There is no appraisal required. With the Streamline Loan, you cannot roll any of the costs for the loan (other than the funding fee) into the new mortgage. If there are costs, you must pay for them yourself at the loan closing. You must carry an escrow account for your taxes and home insurance. This also can not be rolled into the loan and must be paid by you at closing as well. If you carry a current escrow account, that will be refunded back to you after your new Rural Development Loan has paid off the current Rural Development Loan.
A full refinance with Rural Development will require an appraisal and the new loan can be written up to the appraised value of the home. As long as there is enough equity in the home based on the appraisal, you can roll in the mortgage costs for the loan. The 1.5% funding fee will be rolled into the new Rural Development Loan. This means that your mortgage can go up to 1.5% over the appraised value of the home. With a full Rural Development Refinance Loan, you must carry an escrow account for your taxes and home insurance. This can also be rolled into the new mortgage loan if there is enough equity in the property based on the appraised value. If you currently have an escrow account, that will be refunded back to you after your new Rural Development Loan has paid off your current Rural Development Loan. Some lenders can issue a credit to you at closing for the escrow balance. This is case by case.
For more information on Rural Development Refinancing of your home, you can visit the US Rural Development website at http://www.rurdev.usda.gov/MI/sfh/sfhmain.htm or contact me directly with any questions.