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USDA Refinance Loans
There are many reasons a homeowner might want to refinance their mortgage. They might want to refinance to get a lower rate thus lowering their payment, or refinance to get cash out of their home's equity which can be used to do things such as pay off debt or make home renovations. These are some reasons why refinance applications go up when mortgage rates drop.
The USDA Refinance loan is the only mortgage that has separate requirements when it comes to refinancing outside of the loan-to-value restrictions. The USDA Home Loan requires borrowers to have a current USDA Loan in order to refinance to the loan product again. For example, if a borrower purchased a home with a FHA loan and 5 years later they want to refinance, they cannot finance into USDA Loan terms. Another restriction of the USDA refinance loan is that it is for rate and term refinances only so a borrower cannot take cash out. The only reason a person would refinance a USDA loan would be to get a lower interest rate. The challenge is since the USDA loan offers no money down, when someone purchases the home it takes some time before there is enough equity in the home to be able to refinance without the borrower having to bring cash to close.
The USDA Refinance Loan only makes sense in a few scenarios. The borrower must have purchased the home with the USDA loan and they can only do a rate term refinance.