FHA Streamline Refinance

Sometimes It Pays to Refinance

The FHA Streamline Refinance program gets its name because it allows borrowers to refinance an existing FHA loan to a lower rate more quickly. Avoiding a lot of paperwork, and often without an appraisal, the Streamline option saves borrowers time and money.

You can reduce the interest rate on your current mortgage without a full credit check, yet you need to have paid your mortgage on time over the last 12 months. There is no requirement for income verification either. FHA Streamline loans have reduced paperwork, simple requirements for eligibility, and a list of features which makes it very attractive for borrowers.

If you have an existing FHA mortgage, you've already proven you are a good credit risk for an FHA-guaranteed loan. Because of this, you don't need to calculate a debt-to-income ratio for the new FHA Streamline loan, but it's always a good idea to have a second look at your finances for your own information.

Under the FHA Streamline program, your new loan can't exceed the original amount you borrowed to purchase the home. There might not be a need for an appraisal either, depending on your current home equity and loan balance. You do have the option to get your property reappraised and qualify for a higher amount if the value of the property has increased.

FHA Streamline loans don't require a meeting with your loan officer--you may be able to apply by phone or complete some paperwork over the Internet if your lender permits. The lender may require your actual, handwritten signature on some documents, so be prepared to complete and mail in some forms before the process is officially declared finished.

It’s important to remember that the FHA Streamline Refinance loans aren't the same as cash-out refinancing programs, and you won't get any more than $500 cash. The main benefit with Streamline FHA-guaranteed loans is that your monthly payments are permanently lowered. The extra money you have at the end of the month can go a long way toward helping you reach your financial goals.

While the information presented is from the official FHA guidelines, some lenders may have additional requirements for borrowers to meet.

FHA Streamline Eligibility

The FHA has some basic requirements that all borrowers must meet when applying for an FHA Streamline Refinance. Since the FHA does not allow lenders to include closing costs in the new mortgage amount of a streamline refinance, FHA-approved lenders can vary on the way they offer FHA Streamline refinances. In essence, the FHA Streamline Refinance is a good option for you if you are currently in good standing with your current mortgage, and are looking to save some money on your monthly payments.

Your Current Mortgage Must Already Be FHA-insured
While refinancing from a conventional loan to one backed by the FHA is possible, the Streamline option is only available to borrowers with an existing FHA home loan. If you have a conventional loan you wish to refinance with an FHA loan, you'll need to apply with the usual employment verification, credit check, debt ratio requirements and other considerations.

The Mortgage Must Be Current
This means that you have not missed any payments. You must have made at least 6 monthly payments and have had your existing mortgage for a minimum of 210 days before you can apply for the Streamline Refinance option. Late payments can count against you, but according to FHA guidelines, there is an exception. If you’ve had your FHA loan for under a year and have not missed your payment deadline by more than 30 days, you are not disqualified from a Streamline Refinance (However, most lenders might not accept any applicant with delinquent payments).

There Must Be a Net Tangible Benefit
The FHA actually requires that there be some advantage for the borrower if they go ahead with a Streamline Refinance. If refinancing makes it easier for you to make your monthly payments on time, then the FHA is off the hook for reimbursing your lender in the case of you defaulting on your mortgage. For a reduction in the term of the mortgage to be considered a net tangible benefit, certain things must apply. The remaining amortization period of the current mortgage bust be shortened, the new interest rate should not exceed the original one, and the principal, interest, and MIP payment of the new mortgage must not exceed the combined amount of the existing mortgage by more than $50.

FHA Refinance Options for Homeowners

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