Government Programs for Home Refinance in the US

At DSLD Mortgage, we often work with homeowners looking for ways to make their mortgages more affordable. Refinancing is a great option, but it can be tough to qualify for traditional programs, especially if you have a lower income, credit score, or limited savings. The good news is that there are government programs for home refinance designed to help.

These programs can be a lifeline, offering lower interest rates, reduced monthly payments, and even shorter loan terms. In this guide, I’ll walk you through the various government programs for home refinance, explaining the eligibility requirements, benefits, and how to apply for each one. Let’s explore your options and find the best fit for your financial situation.

The Federal Housing Administration (FHA) offers various refinance programs with more flexible qualifying standards than Conventional Loans. They can be a great option if you have an existing FHA Loan or even a Conventional Loan that you’re looking to refinance.

Key Features:

• Easier to Qualify: FHA Loans are known for their more lenient credit score and debt-to-income ratio requirements.
• Lower Credit Score Requirements: You might qualify even with a credit score as low as 580.
• Higher Debt-to-Income Ratios Allowed: FHA Loans may allow for higher DTI ratios than Conventional Loans, giving you more flexibility.
• Loan Limits: The FHA sets loan limits based on where you live. These limits are generally lower than Conventional Loan limits, but they can be a good option for those with lower loan amounts.

If you’re struggling to qualify for a conventional refinance, FHA refinance loans are a good option to explore.

If you already have an FHA Loan, the FHA streamline refinance program might be a perfect fit. This program offers a simplified way to refinance with less paperwork and potentially lower costs.

Key Benefits:

• No Income Documentation: You typically don’t need to provide income verification, making the process quicker.
• No Appraisal: An appraisal might not be required, saving you time and money.
• Lower Credit Score Requirements: You might qualify with a credit score as low as 500 (with a 10% down payment) or 580 (with a 3.5% down payment).

There are some things to keep in mind though:

• Debt-to-Income Ratio: You’ll still need to meet the DTI requirement, typically 43% or less.
• Closing Costs: While streamlined, there are still closing costs, including upfront FHA mortgage insurance.

If you’re looking for a faster and potentially less expensive way to refinance your existing FHA Loan, the FHA streamline refinance is worth considering. Check out our in-depth guide for more information.

Another option among government programs for home refinance is the FHA rate-and-term refinance. This program allows you to refinance your existing mortgage, whether it’s an FHA Loan or a Conventional Loan, and potentially secure a lower interest rate or shorten your loan term.

Key Features:

• High Loan-to-Value Ratio: You can refinance up to 97.75% of your home’s value, giving you more flexibility.
• Roll Costs into Loan: You can include the closing costs in your new loan amount, reducing upfront expenses.
• Income and Credit Documentation Required: Unlike the streamline refinance, you’ll need to provide income and credit documentation.
• Appraisal Required: An FHA appraisal is typically required to determine your home’s current market value.

Main Benefits:

• Lower Interest Rate: Potentially secure a lower interest rate, reducing your monthly payments and overall interest costs.
• Shorter Loan Term: You can choose to shorten your loan term, allowing you to pay off your mortgage faster and build equity more quickly.

If you’re looking to lower your interest rate, shorten your loan term, or both, the FHA rate-and-term refinance program might be a suitable choice among the available government programs for home refinance.

Need funds for home improvements, debt consolidation, or other expenses? The FHA Cash-Out Refinance program, one of the most popular government programs for home refinance, allows you to tap into your home equity and access cash.

Key Features:

• Borrow Up to 80% of Home Value: You can borrow a significant portion of your home’s value, giving you access to substantial funds.
• Similar Requirements to New FHA Loan: Expect similar eligibility requirements, including credit score and DTI, as you would for a new FHA Loan.
• Closing Costs and Mortgage Insurance: Be prepared to pay closing costs and the FHA mortgage insurance premium.

Important Considerations:

• Higher Mortgage Insurance Costs: FHA Loans typically have higher mortgage insurance costs than other loan types. Factor these costs into your comparison when considering your options.

If you need cash and meet the eligibility requirements, the FHA Cash-Out Refinance program can be a helpful option.

The U.S. Department of Veterans Affairs (VA) provides valuable government programs for home refinance designed specifically for veterans, active-duty military personnel, and eligible surviving spouses. These programs can help you lower your interest rate, access your home equity, or make your mortgage more affordable.

One of the most popular government programs for home refinance for veterans is the VA Interest Rate Reduction Refinance Loan (IRRRL), also known as the VA streamline refinance. This program is designed specifically for veterans with existing VA Loans who want to lower their interest rates and potentially reduce their monthly payments.

Key Benefits:

• Lower Interest Rates: The primary goal of the IRRRL is to help you secure a lower interest rate, which can lead to significant savings over the life of your loan.
• Simplified Process: This program offers an easier refinancing experience with less paperwork and fewer requirements.
• No Appraisal: A new appraisal is typically not required, saving you time and money.
• No Income Verification: You generally don’t need to provide income documentation, making the process faster and easier.
• No Credit Underwriting: Your credit is not typically re-evaluated, making it accessible even if your credit score has slightly declined.
• Roll Closing Costs into Loan: Unlike some other streamline refinance programs, you can roll the closing costs into your new loan amount, reducing upfront expenses.

Eligibility Requirements:

• Existing VA Loan: You must currently have a VA Loan to be eligible for the IRRRL.
• Lender’s Requirements: While the program offers great features, you’ll still need to meet your lender’s credit and financial requirements.

If you have a VA Loan and are looking to lower your interest rate and potentially reduce your monthly payments, the VA IRRRL is a fantastic option among the available government programs for home refinance.

Another valuable option among government programs for home refinance is the VA Cash-Out Refinance. This allows eligible veterans and active-duty military personnel to access their home equity and receive cash, even if they don’t currently have a VA Loan.

Key Features:

• High Loan-to-Value Ratio: You can borrow up to 90% of your home’s value, which is generally higher than what’s allowed with FHA or conventional Cash-Out Refinance options.
• Access to Cash: Use the funds for a variety of purposes, such as home improvements, debt consolidation, education expenses, or other financial needs.
• Eligibility for Non-VA Loans: Even if you don’t currently have a VA Loan, you might be eligible for a VA Cash-Out Refinance if you meet the program’s requirements.

Requirements:

• Certificate of Eligibility (COE): You’ll need a COE to prove your eligibility for VA Loan benefits.
• Minimum Credit Score: Most lenders require a minimum credit score of 620, though this can vary.
• Closing Costs and Funding Fee: Be prepared to pay closing costs and the VA funding fee, which can be rolled into your loan amount.

If you’re eligible and need to access your home equity, the VA Cash-Out Refinance program can be a powerful option to consider.

Looking for government programs for home refinance in a rural or less densely populated area? The United States Department of Agriculture (USDA) offers refinance loans specifically designed to assist low- and moderate-income borrowers in eligible areas. These loans can be a fantastic option for those who meet the program’s requirements.

Among the available government programs for home refinance, the USDA Streamlined-Assist Refinance stands out as a simplified and efficient option for those with existing USDA Loans. This program aims to make refinancing easier and more accessible.

Key Features:

• No Credit Review: Your credit history and score are not typically re-evaluated, making this program accessible even if your credit score has changed since your original USDA Loan.
• No DTI Calculation: Your debt-to-income ratio is not recalculated, providing more flexibility.
• No Appraisal or Inspection: A new appraisal or home inspection is generally not required, saving you time and money.
• Reduced Paperwork: The process often involves less documentation, making it faster and easier.

Eligibility Requirements:

• Existing USDA Loan: You must currently have a USDA Loan to be eligible for this program.
• Income and Property Eligibility: You’ll need to meet the USDA’s income limits and property location requirements.

In addition to the Streamlined-Assist Refinance, the USDA offers a rate-and-term refinance option as part of its government programs for home refinance. This program is designed for homeowners with existing USDA Loans who want to take advantage of potentially lower interest rates or shorten their loan term.

Key Features:

• Lower Interest Rate: Refinance to potentially secure a lower interest rate, which can lead to significant savings over the life of your loan and reduce your monthly payments.
• Shorter Loan Term: Choose to shorten your loan term to pay off your mortgage faster and build equity more quickly.
• No Cash-Out: This program is specifically for rate and term adjustments; you cannot take cash out of your home equity.

Eligibility Requirements:

• Existing USDA Loan: You must currently have a USDA Loan to be eligible for this refinance option.
• Income and Property Eligibility: You’ll need to continue to meet the USDA’s income limits and property location requirements. Remember, eligible areas include not just rural areas but also less densely populated towns and suburbs.

Even if you don’t currently have a USDA Loan, you might still be able to take advantage of their benefits through the USDA non-streamlined refinance option. This program allows you to switch from a Conventional Loan to a USDA loan, potentially offering benefits like no down payment and lower mortgage insurance costs.

Key Features:

• New 30-Year Fixed-Rate Mortgage: You’ll get a brand-new 30-year fixed-rate USDA mortgage with potentially more favorable terms.
• No Down Payment: One of the biggest perks of USDA Loans is the potential to refinance without a down payment.
• Lower Mortgage Insurance: USDA Loans typically have lower mortgage insurance premiums than other loans, which can save you money.

Eligibility Requirements:

• Income and Property Eligibility: You’ll need to meet the USDA’s income limits and property location requirements. 
• Full Appraisal: A full appraisal is required to determine your home’s current market value.
• Credit Score: You’ll likely need a minimum credit score of 640, though this can vary by lender.

The USDA offers valuable government programs for home refinance and assistance to homeowners in eligible rural areas who are looking to repair, improve, or build a new home. These programs provide affordable financing options and even grants to help make homeownership more accessible and affordable in less densely populated areas.

Key USDA Programs:

• Single-Family Housing Repair Loans and Grants (Section 504): This program offers loans of up to $40,000 and grants of up to $10,000 to very low-income homeowners to repair, improve, or modernize their homes. Loans have a fixed interest rate and are repaid over 20 years, while grants are available to homeowners aged 62 or older and do not need to be repaid.
• Single-Family Housing Guaranteed Loan Program: This helps approved lenders provide affordable financing to low and moderate-income borrowers to build a new home or make significant repairs and renovations to an existing home in an eligible rural area.

Government programs for home refinance offer valuable opportunities for homeowners to improve their financial well-being and achieve their homeownership goals. Whether you’re looking to lower your interest rate, reduce your monthly payments, or access your home equity, these programs can provide the support you need.

When considering government programs for home refinance, carefully evaluate your individual circumstances, financial goals, and eligibility for each program. Don’t hesitate to seek guidance from a qualified mortgage professional who can help you understand the options and make informed decisions.

DSLD Mortgage is here to help you explore your refinancing options and find the best solution for your needs. Contact us today to discuss your goals and take the first step towards a more affordable and secure financial future.

1. Nerdwallet: FHA Loans: What to Know in 2025 — Dec 20, 2024
2. The Mortgage Reports: Mortgage Relief and Mortgage Assistance Grants — January 7, 2025
3. Nerdwallet: Government Home Loans to Buy, Refinance, or Renovate — Dec 3, 2024
4. Bankrate: VA Loans: Their Benefits And Disadvantages — June 12, 2024