Today’s extraordinarily low interest rates make refinancing an existing mortgage a feasible option for many current homeowners. When paired with an existing Federal Housing Administration-insured mortgage, however, the refinancing process can produce significant savings through a simple, streamlined process.
An FHA Streamline Refinance applies today’s low interest rates to a borrower’s current FHA mortgage to shorten the term of the loan, secure a lower interest rate, or both often without the traditional paperwork and processes. And because the borrower has already qualified for an FHA mortgage, a streamlined refinance can often avoid another FHA appraisal, saving time and money. This article will detail the FHA Streamline refinancing process to help you determine whether an FHA Streamline is the right refinance option for you.
The Basics
To be eligible for an FHA Streamline refinance, your current mortgage must be FHA-insured. This existing FHA backing can not only satisfy the requirement for an appraisal of the property, but gives credence to your creditworthiness as a borrower. With your credibility previously established when you secured the original FHA loan, the refinancing process can proceed along a much quicker timeline.
As further confirmation of your ability to handle your loan responsibilities, your existing mortgage must be free from any delinquent payments. Similarly, FHA requires at least six monthly payments to have been made on your mortgage, that you’ve had for a minimum of 210 days, before pursuing a streamline refinance.
Importantly, to ensure you aren’t taken advantage of, an FHA Streamline refinance must result in net tangible benefit to you before you can qualify. Net tangible benefit arises when your new loan has either a shorter term, a lower interest rate, or both. To qualify for a streamline refinance through a shortened amortization period, your new interest rate should not exceed the original, and the principal, interest and upfront mortgage insurance premium should not exceed the combined amount of your original mortgage by more than $50.
An FHA Streamline refinance can give you a partial refund of your previous upfront mortgage insurance premium. But, this refund amount will decrease the longer you wait to refinance, so contact HomeLend USA today to find out how to pursue the best loan for you!
Some additional requirements help to distinguish an FHA Streamline from other refinance options. For example, unlike a cash-out refinance, a maximum of $500 can be taken out with the new loan. To further keep costs down during repayment, your new loan cannot exceed the amount of the original mortgage used to purchase the property.
Other Things to Know
There are two FHA Streamline refinancing options. While both the credit qualifying and non-credit qualifying routes will still result in a net benefit for the borrower, the former requires some additional documentation. These extra steps, including a credit check and calculating your debt-to-income ratio, allow you to make changes to your existing loan, such as removing a borrower from the original mortgage. While the credit qualifying option may seem to obstruct the streamline process, its additional documentation and more hands-on process may result in a lower interest rate, when compared to the non-credit qualifying outcome.
While the FHA Streamline refinance is reserved for those with an existing FHA loan, borrowers with a conventional loan can refinance into an FHA loan by following the credit-qualifying Streamline option: employment verification, credit check, and calculating the debt-to-income ratio.
Given the various requirements and conditions, lenders offer various ways to complete an FHA Streamline refinance. For example, because closing costs cannot be included in the new mortgage amount of a Streamline refinance, you may have the option to secure a no-cost refinance by choosing a marginally higher interest rate in exchange for the lender paying closing costs. Similarly, the upfront mortgage insurance premium can be bundled into a larger loan, provided your resulting monthly payment is still reduced or the length of your loan is shortened.
An FHA Streamline Refinance offers unique benefits when compared to other refinancing options, allowing you to take advantage of today’s low rates and secure a better mortgage for your future. Some lenders, however, have unique requirements and fees that must be satisfied before you can qualify for an FHA Streamline. Call HomeLend USA at 248-781-9400, or visit our website www.homelendusa.com today to begin the process of finding the best lender and program match for your refinance.
