• When you streamline a USDA refinance, you get a new USDA mortgage without needing an appraisal.
  • There are two types of streamline refinances: USDA streamline and USDA streamlined assist.
  • You can choose between the two based on your qualifications and financial needs.
  • See Insider’s picks for the best mortgage refinance lenders »

What is a USDA streamline refinance, and how does it work?

With a USDA streamline refinance, you refinance from one USDA mortgage into another. It uses the word “streamline” because the process is faster than with most types of refinances. You usually don’t need to get an appraisal, and in some cases, you don’t even need to show your credit score or debt-to-income ratio.

You may choose to refinance with the same lender you used for your initial mortgage, but you don’t have to. Shop around for the lender that offers the lowest rates and fees.

When it comes to streamlining your USDA refinance, you have two options: a USDA streamline refinance and USDA streamlined assist refinance.

They are both tools for refinancing from one USDA mortgage into a new one, and in most cases, neither requires an appraisal. But there are some key differences between the two.

You can do either type of refinance if you have a USDA direct loan (one straight from the USDA) or a USDA guaranteed loan (one you got from a private lender that’s backed by the USDA). 

You shouldn’t need to get a new appraisal with either refinance, unless you have a direct loan and have collected a payment subsidy.

With a USDA streamline refinance, you need to show the lender your credit score and debt-to-income ratio to qualify. You can add or remove someone’s name on the mortgage.

A USDA streamlined assist refinance does not require you to show your credit score or DTI ratio. You can add someone’s name to the mortgage, but you can only remove a name if the person has died.

Your choice between the two will come down to your situation. For example, you might prefer a USDA streamline refinance if your credit score has improved since you got your initial mortgage, because a better score can land you a lower interest rate.

As these two types of refinances work a little differently, each one has its own rules about who is eligible.

USDA streamline refinance

  • Have a USDA mortgage. You should already have a USDA mortgage, either a direct or guaranteed loan. You can’t use a USDA streamline refinance to refinance from another type of mortgage into a USDA loan.
  • Current on payments. You must have made all mortgage payments on time for at least the last 180 days.
  • Time restraints. A minimum 12 months should have passed since you closed on your original USDA mortgage.
  • Credit score and debt-to-income ratio. You must show your credit score and DTI ratio. For a USDA mortgage, you’ll likely need a 640 score and DTI ratio of 41% or lower.
  • No cash out. You can’t use a USDA streamline refinance to receive cash. Unlike other types of mortgages, USDA loans don’t have a cash-out refinance option.

USDA streamlined assist refinance

  • Have a USDA mortgage. You should already have a USDA direct or guaranteed loan. A USDA streamlined assist refinance won’t refinance another type of mortgage into a USDA loan.
  • Current on payments. You need to have made all mortgage payments on time for at least the last 12 months.
  • Tangible financial benefit. The USDA requires a streamlined assist refinance to put you in a better financial position than your initial mortgage. Your principal, interest, taxes, and insurance payments must be at least $50 less per month.
  • No cash out. You can’t refinance to receive cash. Unlike other types of mortgages, the USDA doesn’t have a cash-out refinance option.

As with any big financial decision, there are tradeoffs to streamlining your refinance. Think about the following factors before making your decision:

Pros

  • Lower rate. The USDA requires either type of streamline refinance to lock in a lower rate than you paid on your original mortgage. Landing a better rate could save you thousands (or tens of thousands) over the years.
  • Save money. If you choose a USDA streamlined assist refinance, you must have a “tangible benefit,” meaning your monthly payments should be at least $50 lower.
  • No appraisal. In most cases, you don’t need an appraisal with either streamline option. This will save you both time and money.

Cons

  • Only one term option. You can only refinance into a 30-year fixed-rate mortgage. Let’s say you have 15 years left on your initial mortgage, and you refinance into a 30-year term. You’ll have to pay your mortgage for 15 extra years. Even if you get a lower rate, paying for longer could ultimately cost you more. You do have the option to pay off your mortgage early, though.
  • Closing costs. As with any type of mortgage, you have to pay closing costs all over again when you refinance. This includes a 1% guarantee fee that comes with all USDA mortgages. Closing costs will come to thousands of dollars, so be sure to budget accordingly.
  • No cash-out options. If you’ve gained equity in your home since buying it, you may want to tap into that equity by doing a cash-out refinance. The USDA doesn’t offer any cash-out refinances, though.

Maybe you want to refinance your USDA mortgage, but you don’t know that streamlining is the best move. You have a few other options.

Non-streamlined USDA refinance

You can refinance from your current USDA mortgage into another without streamlining the process. This way, you’ll go through an appraisal and show your credit score and debt-to-income ratio.

This could be a good option if your home has gained value since you bought it. A new appraisal would show that you have more equity in your home, which could land you a better rate.

Conventional refinance

You can refinance your USDA mortgage into a conventional mortgage, which may be what you think of as a “regular mortgage.”

Because you can only refinance into a USDA mortgage with a 30-year term, a conventional mortgage could be good if you want a shorter term length. It could also help you stop paying for mortgage insurance. With a USDA guarantee fee (which is like mortgage insurance), you’ll pay 1% of your principal at closing, then an annual premium of 0.35% of your remaining principal. But if you have at least 20% equity in your house, you won’t have to pay for mortgage insurance with a conventional mortgage.

It’s harder to qualify for a conventional mortgage, though. You’ll probably need a 620 credit score, 36% debt-to-income ratio, and 20% equity in your home.

Cash-out refinance

You may refinance from a USDA mortgage into a conventional mortgage and pocket some cash in the process. This is a solid choice if you’ve gained equity in your home and want to use money for other expenses.

With a cash-out refinance, you take out a loan larger than the amount you still owe, and you receive a portion of your home’s gained value in cash. You can use the money however you want.

The type of refinance you choose will depend on your financial situation. Do you want to refinance into another USDA mortgage? If so, a USDA streamline or streamlined assist refinance can help you lock in a lower rate without undergoing an appraisal.

Laura Grace Tarpley is the associate editor of banking and mortgages at Personal Finance Insider, covering mortgages, refinancing, bank accounts, and bank reviews. She is also a Certified Educator in Personal Finance (CEPF). Over her four years of covering personal finance, she has written extensively about ways to save, invest, and navigate loans.

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