Yes, you can refinance a USDA loan. Refinancing can be an excellent opportunity to lower your interest rate, reduce your monthly payment, or even change your loan term. USDA loans are a great option for low- to middle-income families, offering benefits like no down payment and lenient lending requirements. If you’re wondering whether refinancing your USDA loan is right for you, this guide will explain your options and the steps involved in the process.
Key Takeaways
- USDA loans can be refinanced to lower your monthly payments, but you must meet certain requirements, such as being current on your mortgage.
- Three types of USDA refinances are available: Streamlined-Assist, Streamlined, and Non-Streamlined, each with different requirements and approval processes.
- Streamlined-Assist refinances offer the fastest approval, with no credit check or appraisal, making them a good option if you have little home equity.
- USDA refinances don’t allow cash-out options or shorter loan terms; loans are only available in 30-year terms.
- Refinancing might be difficult if your income has increased, as you may no longer qualify for USDA loan income limits.
Can You Refinance a USDA Loan?
If interest rates have dropped since you first took out your mortgage, you might be considering refinancing your USDA loan to reduce your monthly payments or adjust your loan terms. Fortunately, USDA loans can be refinanced. Let’s take a look at how USDA loan interest rates are trending:
How we source rates and rate trends
Rates based on market averages as of Dec 02, 2025.Product Rate APR 30-year Fixed Usda Purchase 5.60% 5.74% 30-year Fixed Usda Refinance 5.56% 5.70%
You have two main options: refinancing through the USDA program or transitioning to a different loan type, such as a conventional, FHA, or VA loan.
As with any refinance, certain requirements must be met, including:
- Maintaining an acceptable credit score
- Having sufficient equity if required
- Being current on your existing mortgage payments
The USDA refinance program has its own set of guidelines, which are typically focused on ensuring affordability for eligible borrowers.
However, one of the biggest challenges for many USDA borrowers is finding a lender that offers refinancing options tailored to their situation. Exploring multiple lenders and understanding your refinancing goals—whether staying with the USDA program or switching to another—can help you make the best financial decision.
Types of USDA Refinances
Before you begin your USDA refinance, it’s important to understand your options. Here’s an overview of the three different types of USDA refinances available.
USDA Streamlined-Assist Refinance
While the typical home refinance can take weeks or even months, a USDA Streamline-Assist refinance was designed to speed up the process.
The biggest upside to a USDA Streamlined-Assist refinance is that you won’t be required to go through the credit approval process again. This means your lender won’t be checking your credit score, they don’t care about your debt-to-income ratio, and if you have a late payment on one of your other bills, it won’t hurt your approval odds.
Plus, there won’t be an appraisal before closing on your loan, so you can still refinance even if you have little equity in the home.
Before moving forward with a USDA Streamlined-Assist refinance, you should know a few requirements.
- When you refinance, there must be at least a $50 reduction in your monthly mortgage payment.
- You must have made 12 consecutive on-time mortgage payments before starting the refinance process.
- You can include closing costs and the upfront USDA guaranteed fee into the loan balance.
- You can only remove borrowers from the loan if they have passed away. However, you can add anyone to the loan during the refinance.
- There will be no required appraisal on the home unless the Direct Loan borrower receives a subsidy.
- The home must still be the borrower’s primary residence.
USDA Streamlined Refinance
USDA Streamlined refinance is going to be very similar to a Streamlined-Assist refinance. While you won’t need to have your home appraised, you will need to go through a credit and income check.
If you use a USDA Streamlined refinance, you’ll want to be aware of the requirements.
- You’ll need to meet credit requirements set by the USDA.
- Your household income must fall within the USDA income limits.
- You must have been current on your mortgage payments for the past 180 days before applying for refinancing.
- You must have held the previous mortgage for at least 12 months before refinancing.
- There will be no required appraisal on the home unless the Direct Loan borrower receives a subsidy.
- You can include closing costs and the upfront USDA guaranteed fee into the loan balance.
- The loan amount must not exceed the original loan amount.
- The home must still be the borrower’s primary residence.
- Borrowers can be added or removed as long as one of the original borrowers remains on the loan.
USDA Non-Streamlined Refinance
A USDA Non-Streamlined refinance isn’t as simple as the first two options. However, with a non-streamlined refinance, the requirement for at least a $50 reduction in your mortgage payment is removed.
However, you’ll need to go through a full approval process, during which the lender will pull your credit report, check your credit score, and verify your income. You will also need to have your home appraised.
This means the refinance process on a non-streamlined refinance will take a little longer.
If you choose to use a USDA non-streamlined refinance, you’ll want to know the requirements. Many are the same as the other refinancing options.
- Borrowers will need to meet the USDA’s requirements for credit and income.
- Borrowers must have had their current mortgage for at least 12 months.
- You must have been current on your mortgage payments for the past 180 days.
- You can add or remove borrowers, but one of the original borrowers must remain on the loan.
- The home being refinanced must be the primary residence.
- You can finance the closing costs and upfront guarantee fee into your mortgage.
Pros and Cons of Refinancing With the USDA Loan Program
Before you move forward with refinancing your USDA loan, it’s important to consider the pros and cons.
Pros
- You can finance your closing costs and upfront guarantee fees
- With a USDA Streamlined-Assist refinance, you can avoid the credit approval process.
- You won’t be required to have an appraisal when using a USDA Streamlined or Streamlined-Assist refinance.
- You can refinance even if your home has no equity or negative equity.
Cons
- USDA refinancing doesn’t allow you to cash out equity in your home.
- If your income is greater than when you applied for your current mortgage, you may no longer qualify for a USDA loan.
- You can’t reduce your loan term so that you can pay off your mortgage sooner. USDA loans are only available for 30 years.
Refinancing Out of a USDA Loan
While USDA loans offer unique benefits, such as no down payment and competitive interest rates, there are scenarios where refinancing into a different type of loan might be a better fit. Below are the primary options for transitioning out of a USDA loan, depending on your financial goals and eligibility.
Conventional Loan Refinance
Refinancing into a conventional loan can be an attractive option, especially if you’ve built up sufficient equity in your home. With a conventional loan, you can eliminate USDA’s upfront and annual guarantee fees, potentially saving you money in the long run.
Why Choose This Option? You may qualify for lower interest rates, avoid private mortgage insurance (PMI) with 20% equity, or remove USDA’s income eligibility restrictions.
What to Consider: Conventional loans typically require higher credit scores and a more favorable debt-to-income (DTI) ratio than USDA loans.
FHA Loan Refinance
If you’re looking for a government-backed option but don’t meet conventional loan requirements, an FHA refinance could be a viable alternative. FHA loans have flexible credit requirements and allow refinancing even with limited equity.
Why Choose This Option? FHA loans can be easier to qualify for, and their mortgage insurance premiums may be more favorable depending on your loan size and term.
What to Consider: FHA loans require upfront and ongoing mortgage insurance premiums (MIP), which may offset some of the benefits.
VA Loan Refinance (For Eligible Veterans and Service Members)
If you’re a veteran, active-duty service member, or eligible surviving spouse, refinancing your USDA loan into a VA loan could be an excellent choice. VA loans offer no down payment, competitive interest rates, and no ongoing mortgage insurance.
Why Choose This Option? VA loans eliminate the need for mortgage insurance entirely, and their terms are often highly favorable for those who qualify.
What to Consider: You’ll need to meet VA loan eligibility requirements, including a Certificate of Eligibility (COE).
Cash-Out Refinance
If you have significant equity in your home and want to access cash for expenses like home improvements, debt consolidation, or other financial goals, a cash-out refinance might be an option. You can use a conventional, FHA, or VA cash-out refinance for this purpose.
Why Choose This Option? It provides access to your home’s equity while transitioning out of the USDA loan program.
What to Consider: Cash-out refinances often come with higher interest rates, and you’ll need sufficient equity to qualify.
The Bottom Line
If interest rates have fallen since you took out your USDA loan, you may want to refinance to lower your monthly payment. Luckily, refinancing a USDA loan is possible and can even be done if you have little equity in your home.
