Program Features - Refinance

•	Loan must be secured by the same property as the original loan. The original loan must be Guaranteed Rural Housing (GRH) or USDA Section 502 Direct only. The Program may not be used to refinance FHA, VA, or other government or conventional mortgages.

•	Term of the new loan will be 30 years.

•	Interest rate of the new loan must be a fixed rate.

•	Interest rate of the new loan cannot exceed the interest rate of the loan being refinanced. However, the interest rate of the new loan does not have to meet the interest rate requirements established in RD Instruction 1980-D, §1980.320 Interest rate.

•	Property must be owned and occupied by the borrowers as their principal residence.

•	Discount Points may not be financed into the loan.

•	Temporary buydowns are not permitted.

•	The guarantee fee may be calculated in two ways, depending on whether the fee will be financed.

Transaction Type

Guarantee Fee Not Financed

Guarantee Fee Financed

Purchase Transactions

Multiply the loan amount by 2.0% and round to the nearest cent.

Example: $100,000 x .02 = $2,000

The fee is calculated as follows:

1. Divide the base loan amount by .98 and round to the nearest cent.

2. Multiply that number by .02 (2.00%) and round to the nearest cent.

Example: $100,000 ÷ .98 = $102,040.816326 (rounded to $102,040.82).

$102,040.82 x .02 = $2,040.8164 (rounded to $2,040.82).

Rate and Term Refinances

Multiply the loan amount by .50%.

Example: $100,000 x .005 = $500

Follow steps 1 and 2 above, substituting .9950 for .98 and .005 for .02.

Example: $100,000 ÷ .995 = $100,502.51.

$100,502.51 x .005 = $502.51.

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The .50% guarantee fee may be always financed into any GRH refinancing transaction. As usual, borrowers may finance other closing costs and fees up to 100% of the current appraised value. However, it is possible for the loan-to-value (LTV) of the new loan to reach 100.5% if the .50% guarantee fee is financed. Loans may exceed 100% LTV only to the extent that the excess represents a financed guarantee fee of no more than .50%.

•	Total household income cannot exceed the moderate level for the area as established in RD Instruction 1980-D, Exhibit C.

•	GRH refinance loans are permitted for properties in areas that have been determined to be non-rural since the existing loan (RD) was made.

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Applicants are not eligible to receive “cash out” from the refinancing transaction. However, applicants may receive reimbursement from loan proceeds at settlement for their personal funds advanced for eligible loan purposes that are part of the refinance transaction, such as an appraisal fee or credit report fee. At loan closing, a nominal amount of “cash out” to the applicants (beyond reimbursement of these “prepaid” items) may occasionally result due to final escrow and interest calculations. This amount, if any, must be applied to a principal reduction of the new loan.

•	Subordinate financing such as home equity seconds and down payment assistance “silent” seconds cannot be included in the new loan amount. Any existing secondary financing must be subordinate to the new first lien.

•	Maximum loan amount cannot exceed the balance of the loan being refinanced, plus the guarantee fee, and reasonable and customary closing costs, including funds necessary to establish a new escrow account.

•	Unpaid fees, such as late fees due the current servicer, are not eligible to be included in the new loan amount.

•	As part of the refinancing transaction, additional borrowers may be added to the new GRH loan or existing borrowers may be deleted from the current loan. All applicants that will be a party to the promissory note for the new loan must meet all eligibility requirements.

•	Ratios must meet requirements as stated in RD Instruction 1980-D, §1980.345(c)(3). The monthly housing expense to income ratio should typically not exceed 29% and the total debt to income ratio should typically not exceed 41%. Exceptions or ratio waiver requests will not be granted.

•	A complete Uniform Residential Appraisal Report (URAR) is required unless the refinance loan amount includes only the unpaid principal balance with or without the .50% guarantee fee.

No other property inspections or thermal certifications are necessary. However, any conditions noted on an appraisal that are related to the safety or livability of the subject property must be addressed and rectified prior to loan closing. Expenses related to property inspections and property repairs may not be financed into the new GRH refinance loan, or escrowed for prior to closing.