can you refinance a usda home loan

Yes, it is possible to refinance a USDA home loan. Refinancing allows homeowners to replace their existing mortgage with a new one, often to obtain better loan terms or cash out some of their home equity. When it comes to USDA loans, homeowners have the option to refinance through the USDA Streamline Refinance program or by obtaining a conventional refinance from a private lender. Each option has its own set of requirements and benefits, so it’s essential to understand the process and eligibility criteria before pursuing a refinance.

Refinancing Options for USDA Home Loans

There are two primary options for refinancing a USDA home loan: USDA Streamline Refinance and conventional refinancing. Let’s explore each option in detail:

1. USDA Streamline Refinance

The USDA Streamline Refinance program is designed specifically for homeowners with an existing USDA loan. Its main purpose is to simplify the refinancing process, making it more accessible for eligible borrowers. Here are some key features of the USDA Streamline Refinance program:

  • No appraisal is required, meaning the current market value of the property is not taken into account.
  • No credit check is necessary, provided that the homeowner has made their mortgage payments on time for the previous 12 months.
  • No income verification is needed as long as the borrower’s income hasn’t significantly decreased since the original loan was obtained.
  • The borrower can finance the upfront guarantee fee, which is typically 1% of the loan amount, into the new loan.

It’s important to note that the USDA Streamline Refinance does not allow borrowers to take cash out or pay off other debts. Its primary purpose is to lower the interest rate and monthly payment.

2. Conventional Refinancing

Alternatively, homeowners with a USDA loan can refinance through conventional refinancing. This involves obtaining a new mortgage from a private lender, such as a bank or credit union, and using it to pay off the existing USDA loan. Here are some key aspects of conventional refinancing:

  • The homeowner’s credit score, income, and property value are taken into consideration during the application process.
  • An appraisal is typically required to assess the current market value of the property.
  • Borrowers may be able to access their home equity through a cash-out refinance, allowing them to use the additional funds for various purposes.
  • The borrower can choose from various loan terms and interest rates offered by different lenders.

Conventional refinancing can be a suitable option for homeowners who wish to change their loan terms, access home equity, or switch to a fixed-rate mortgage from an adjustable-rate one.

Qualifying for USDA Home Loan Refinance

To qualify for a USDA home loan refinance, certain requirements must be met. While the eligibility criteria may vary depending on the chosen refinance option, here are some general factors to consider:

  1. The homeowner must currently have a USDA loan for a property located in an eligible rural area.
  2. For the USDA Streamline Refinance, borrowers must have made on-time mortgage payments for the previous 12 months.
  3. Debt-to-income ratio should not exceed 41%, although there may be flexibility in certain cases.
  4. The homeowner should have a stable and verifiable source of income.
  5. A minimum credit score of 620 is typically required for conventional refinancing, but it may vary depending on the lender.

It’s recommended to consult with a mortgage professional to determine eligibility and explore the best refinance options based on individual circumstances.

Benefits of Refinancing a USDA Home Loan

Refinancing a USDA home loan can offer several benefits to homeowners, including:

  • Reduced monthly mortgage payments, resulting from obtaining a lower interest rate.
  • Access to home equity through a cash-out refinance, which can be used for purposes such as home improvements, debt consolidation, or emergencies.
  • Opportunity to switch from an adjustable-rate mortgage to a fixed-rate one, providing more stability in monthly payments.
  • Potential savings over the long term due to lower interest rates or improved loan terms.

By understanding the available refinancing options and evaluating personal financial goals, homeowners can make informed decisions to optimize their mortgage situation.


In summary, refinancing a USDA home loan is indeed possible. Homeowners can choose between the USDA Streamline Refinance program, specially designed for existing USDA loan holders, or conventional refinancing through private lenders. Understanding the eligibility requirements, benefits, and potential savings associated with each option is crucial for making the most suitable decision. Whether the goal is to lower monthly payments, access home equity, or secure more favorable loan terms, exploring the refinancing possibilities can lead to financial advantages for USDA loan borrowers.