Understanding an FHA Streamline Refinance

Understanding an FHA Streamline Refinance

The FHA has allowed streamlined refinances since the early ’80s to help lower the amount of a person’s monthly mortgage payment and quickly, an FHA streamline refinance is an option. While the federal government offers a number of loan programs, this particular one is popular in that it can be secured very quickly. Therefore, anyone with an FHA or VA mortgage loan, one that is in good standing, would find it easy to qualify for a refinance loan to lower payments.

Known as a “fast track” option, the FHA streamline refinance loan is designed so the underwriting process associated with mortgage loans takes less time. However, this does not mean that there are no costs involved with the refinance. There are basic requirements that must also be met including:

• The mortgage must already be FHA insured
• The mortgage must not be delinquent
• The refinance will lower the borrower’s monthly principal and interest payments
• No cash can be taken out during the process

Using lower interest rates currently being offered, lenders can ultimately decrease the monthly mortgage payment. For a home with 18 years or more of payments still left, the refinanced loan would go back to a 30-year payoff. However, for loans with 12 years or less until maturity, the life of the loan would be based on the original loan’s maturity date.

In addition to people enjoying lower mortgage payments, one of the benefits for an FHA streamline refinance is that the property may or may not need to be appraised. The purpose of using the refinance loan setup without an appraisal is to reduce the amount of the monthly mortgage payment. In this case, the homeowner would not be able to take any money out of the home’s equity whereas refinancing with an appraisal would allow the homeowner to withdraw cash.

The rules for an FHA streamline refinance are somewhat different if the property is considered an investment.

An investment property is a property that the borrower does not actually live in. In a situation such as this, the only amount that could be refinanced would be the balance of the existing loan and can only be refinanced without an appraisal. In addition, the amount of this type of refinance loan could only exceed the standard limitations for an FHA or VA loan.

Depending on the lender of an FHA streamline refinance loan, some offer loans with no associated costs but sometimes, these loans might have a higher interest rate. This simply means that there is no out-of-pocket cost associated with the FHA streamline refinance at the time, but the homeowner eventually pays for those costs overtime by paying a higher interest rate on the new loan. The premium received by the lender is used to pay the closing costs on the newly refinanced loan.

The bottom line is that if a homeowner makes payments on time and at some point wants to refinance, the opportunity would exist with an FHA streamline refinance loan.

FHA Streamline Refinance – Finally, A Simple Way to Refinance Your Home Mortgage

The FHA has allowed streamlined refinances since the early ’80s to help lower the amount of a person’s monthly mortgage payment and quickly, an FHA streamline refinance is an option. While the federal government offers a number of loan programs, this particular one is popular in that it can be secured very quickly. Therefore, anyone with an FHA or VA mortgage loan, one that is in good standing, would find it easy to qualify for a refinance loan to lower payments.

Known as a “fast track” option, the FHA streamline refinance loan is designed so the underwriting process associated with mortgage loans takes less time. However, this does not mean that there are no costs involved with the refinance. There are basic requirements that must also be met including:

• The mortgage must already be FHA insured
• The mortgage must not be delinquent
• The refinance will lower the borrower’s monthly principal and interest payments
• No cash can be taken out during the process

Using lower interest rates currently being offered, lenders can ultimately decrease the monthly mortgage payment. For a home with 18 years or more of payments still left, the refinanced loan would go back to a 30-year payoff. However, for loans with 12 years or less until maturity, the life of the loan would be based on the original loan’s maturity date.

In addition to people enjoying lower mortgage payments, one of the benefits for an FHA streamline refinance is that the property may or may not need to be appraised. The purpose of using the refinance loan setup without an appraisal is to reduce the amount of the monthly mortgage payment. In this case, the homeowner would not be able to take any money out of the home’s equity whereas refinancing with an appraisal would allow the homeowner to withdraw cash.

The rules for an FHA streamline refinance are somewhat different if the property is considered an investment.

An investment property is a property that the borrower does not actually live in. In a situation such as this, the only amount that could be refinanced would be the balance of the existing loan and can only be refinanced without an appraisal. In addition, the amount of this type of refinance loan could only exceed the standard limitations for an FHA or VA loan.

Depending on the lender of an FHA streamline refinance loan, some offer loans with no associated costs but sometimes, these loans might have a higher interest rate. This simply means that there is no out-of-pocket cost associated with the FHA streamline refinance at the time, but the homeowner eventually pays for those costs overtime by paying a higher interest rate on the new loan. The premium received by the lender is used to pay the closing costs on the newly refinanced loan.

The bottom line is that if a homeowner makes payments on time and at some point wants to refinance, the opportunity would exist with an FHA streamline refinance loan.

The Home Refinance Rush

If you’re like many smart homeowners today, you’re thinking of refinancing to a lower rate to take advantage of some of the most attractive loan rates in decades.

It’s true, rates are being kept artificially low with government incentives. And they are guaranteed to rise when the economy goes into solid recovery. So financially savvy mortgage holders are acting now to shore up their debt by cashing in on today’s low rates.

The bottom line is that refinancing in today’s market is a smart move that will pay off for years to come.

FHA, Refinancing, and Economic Recovery

We all know the economy is lagging. Because our economy is so dependent on the health of the housing market, part of the government’s complex recovery plan includes fortifying home values. Naturally, the government wants homeowners to stay in their homes. For many people this requires refinancing to a lower payment.

Where does FHA come in? An FHA home loan is federally insured. To a bank, that means it’s a safer asset than many other types of home loans. Because of the stability of the FHA loan, and because the government wants to make refinancing as easy as possible for citizens, certain requirements have been relaxed to encourage refinancing and to provide for quicker qualification.

In the mortgage industry the new, faster process is called the FHA Streamline.

Good News for FHA Loan Holders

With an FHA Streamline refinance, homeowners are often allowed to skip the appraisal process, one of the biggest snags for homeowners trying to refinance. In some cases they may even be able to skip the income verification.

And all types of current FHA loans qualify for the program.

This means 30- and 15-year fixed-rate FHA loans, as well as all ARM FHA loans.

Do You Have an FHA Loan?

Maybe you’re not sure if you are currently in an FHA Loan. To verify, you’ll need to locate an FHA case number associated with your loan. The case number is usually a 10-digit number, but it can be as many as 13 digits.

Here are some places to look for verification of your FHA loan case number:

Your mortgage statement: On your mortgage statement there should be a breakdown of escrow and your next payout estimate. Often you can find your FHA case number there.
Your loan note: Look on the upper right corner for the case number.
Your home loan appraisal: If you have a copy of your home’s last appraisal, look on the cover page. The case number should be on the upper margin of the first page of the report.

Do You Qualify for an FHA Streamline?

If you’ve determined that you are currently in an FHA insured loan, you may be the perfect candidate for an FHA Streamline. But what else would you need to start rolling toward a refi?

According to the Housing and Urban Development website, the basic requirements of a FHA Streamline refinance are:

The mortgage to be refinanced must already be FHA insured.
The mortgage to be refinanced should be current (not delinquent).
The refinance is to result in a lowering of the borrower’s monthly principal and interest payments.
No cash may be taken out on mortgages refinanced using the streamline refinance process.

If you think these guidelines describe your situation, it’s probably a good idea to speak to a home loan expert or mortgage broker to find out how refinancing can improve your personal finances. Considering the current interest rates, it’s likely refinancing can enhance your bottom line.

A simple example is to look at the numbers on a $ 200k home loan. At 7% interest, that’s a monthly payment of $ 1,330. Refinancing to a rate of 5% would lower the monthly payment to $ 1,074. That’s a monthly savings of $ 256, and a yearly savings of $ 3,072. Over a 30-year loan, that’s a savings of over $ 92,000!

The truth is, the cost of borrowing may never be lower in our lifetime. Qualifying for a refinance now could mean hundreds of dollars per month back in the pockets of homeowners. And with the FHA streamline simplifying the process for millions of qualified homeowners, it could be the most painless savings ever.

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