Some residents in Arkansas struggling to make their mortgage payments may be able to receive help from the United States Department of Agriculture thanks to the expansion of a mortgage refinance program announced Thursday (Jan. 31).
According to a press release from U.S. Sen. Mark Pryor, D-Little Rock, the USDA's Single Family Guaranteed Rural Refinance Program will allow homeowners to renegotiate mortgages with lenders for more favorable interest rates, which could provide a lower monthly mortgage payment.
The USDA laid out the following terms of the program, which it said could lower interest rates for some borrowers below 4%:
• Homeowners must be current on payments during the previous 12 months;
• No new appraisals, property inspections or credit reports will be required, regardless of LTV (loan-to-value);
• Loans will be for a 30-year, fixed rate (at least 100 basis lower than borrower's current rate);
• Borrowers cannot take cash out, they can only refinance the current balance;
• A guaranteed fee of 2% can be rolled into the loan; and,
• The program is only for borrowers who already have a USDA Rural Development 502 direct or guaranteed loan.
Bill Thomas, a loan officer with BancorpSouth, said individuals with a USDA Rural Development loan interested in buying a new home through the program must reside outside of the city limits of Fort Smith, Central City and Barling. Refinancing of an existing mortgage within city limits is allowed if it meets certain criteria.
He cautioned borrowers to weigh whether or not the loan would be financially beneficial.
"They can get a cheaper payment," he said. "But the downside to it, if they have been in their home four or five years, it may stretch it out another 30 years from this point."
Thomas said even though the payment terms would be longer, a lower interest rate on a loan could provide customers with a monthly reduction in payment by nearly $200, on average.
He added that customers would need to reside in the refinanced residence for at least five years in order to come out ahead financially.
"You look at the closing costs, it will take about five years to recoup their money," he said. "You have to ask yourself, 'How long do you plan on staying here? Is it really worth it? Are you going to get your money back?'"
Potential applicants must also meet certain income eligibility, according to Thomas.
According to the USDA Rural Development website, the adjusted median household income for Fort Smith-area families of four seeking to take part in the program was $48,400. In northwest Arkansas, that number was $58,200.
Pryor praised the program's ability to help lower-income households stay in their homes and said he hoped residents would take part in the program.
"I'm pleased the USDA has decided to include our state in this program, and I hope eligible Arkansans will take advantage of this money-saving opportunity," he said.
Thomas said residents interested in taking part in the program should contact their local mortgage lender to see if they participate in the program.