IS an FHA Streamline Refinance Right for Me?
Editor’s note: President Obama gave homeowners eligible for FHA streamline refinances good news, in early March, 2012. First, Obama cut FHA mortgage insurance fees. The fee for up-front mortgage insurance premiums was cut from 1% of the loan balance to .01%. Second, the annual mortgage insurance premium was cut in half from 1.15% to .55%. The changes will save about a $100 per month for a borrower with a $175,000 home loan. In order to qualify for the fee reduction, your current FHA loan had to be delivered to the FHA before June 1, 2009.
FHA Streamline Refinance Requirements
An streamline FHA refinance is a simple way for you to refinance your current FHA loan. It requires less documentation than either a non-streamlined FHA refinance or a conventional refinance mortgage. Less paperwork means you will have a faster and easier loan process.
The general requirements for a streamline FHA refinance, according to HUD, are the following:
- Your current mortgage must be FHA insured.
- You have to be current on your mortgage payments.
- Your refinance must lower your monthly principal and interest payments.
- You are not allowed to take cash out or consolidate debt in a streamline FHA refinance.
(If you don't qualify for an FHA streamline refinance loan but want to refinance your home, than look into a conventional refinance mortgage ).
Reduced Credit Requirements
A recent late payment on a credit account won't disqualify you from an FHA streamline refinance. While you have to be paying your mortgage on time, the credit score impact of other late payments doesn't disqualify you, because your credit score doesn't have to be verified.
No-cost FHA Streamline Refinance
Some lenders may offer you a streamline refinance with no out-of-pocket expenses. Sometimes, these are advertised as "no cost" refinancing. However, they are not really no cost loans. The "no cost" is offset by charging a higher interest rate on the loan.
You can't include the closing costs in the loan amount to avoid paying the costs out-of-pocket.costs to the loan total loan amount. FHA regulations do not allow you to include your closing costs in your streamline refinance. You either have to pay them up front or the lender can pay them.
How Do I Apply?
Start by contacting your lender to confirm that they are still an FHA-approved lender and offer streamlined refinancing. If you're able to refinance through your current lender, you may be able to avoid some fees, such as title insurance. Even if your lender offers FHA refinancing, contact additional FHA-approved lenders so you can comparison shop for the best refinancing offer.
How Long Does FHA Streamline Refinancing Take?
A streamlined refinance is usually takes much less time than either a non-streamlined FHA refi or a conventional refinance. Sometimes, an FHA streamline refi can be closed in as little as two weeks, but times vary. Your lender can advise you what time-frame to expect for your loan to close and what is expected of you during the process.
Can I Do a Streamlined Refinance if My House is Worth Less Than the Loan Balance?
There are no LTV (loan-to-value) requirements for an FHA streamline refinance that does not need an appraisal. This makes it a great option for refinancing to a low rate if you owe more on your home than it is worth.
However, you can't increase your loan balance to cover your closing closing costs. You either have to pay the costs out-of-pocket or have your lender pay them.
Get a Quote for an FHA Streamline
If you already have an FHA loan and interest rates have fallen, or you have an adjustable-rate FHA mortgage and would like a fixed-rate mortgage, you may be eligible for an FHA streamlined refinance. Visit the bills.com mortgage loan savings center for a no-cost quote from FHA lenders.