DEFINITION of 'USDA Rural Refinance Pilot Program'
A mortgage-refinancing option offered in some states and territories by the United States Department of Agriculture (USDA). The USDA rural refinance pilot program is available to homeowners who purchased their home using a Section 502 Direct or Guaranteed loan. These are loans made available to low-income individuals and households in rural areas.
BREAKING DOWN 'USDA Rural Refinance Pilot Program'
Homeowners looking to refinance a guaranteed loan do not need to have their home appraised, but those who have direct loans do need to have an appraisal. In addition to the principal balance, guarantee fees, accrued interest and lender fees may be included. Lenders may also charge an origination fee.
Unlike with USDA streamlined and non-streamlined refinancing, the rural refinance pilot program does not require a credit report. Instead, homeowners must show that they have made their mortgage payments for the previous 12 months. The interest rate charged on the new loan is at a fixed rate at least 100 basis points below the interest rate on the current loan.