Many have heard of the saying, “the children are our future.” There used to be a time when many would agree with this since many generations have proven this to be true. Very few questioned this belief and the educational system did their part in shaping the minds of our future leaders. However, people today are wondering what kind of future will it be as the system is not what it used to be. Many students struggle to graduate with the skills they need to survive and those who want and need to go to college cannot afford to do so. Costs have sky rocketed over the years as parents struggle to help pay for their child’s college education. While this may sound hopeless to achieve for homeowners there are options available that can shine a light at the end of a dark tunnel. One of these choices is known as an FHA Streamline Refinance loan. Before running head first into this bright light, it is important to know what this type of a loan is and how it can benefit a homeowner in need.
What is FHA Streamline Refinance?
Though humans cannot predict accurately what their future holds, it is safe to guess that those who fail to plan ahead will have an unpleasant future. This especially applies to those who would like their offspring to invest in their future and one way to achieve this is by going to college. Unfortunately, this can be hard to do with college tuition increasing every year as well as unforeseen costs that takes money out of their college fund. While this scenario can be discouraging, homeowners may have an opportunity to resolve this situation through a refinance loan. To begin with, the process of refinancing occurs when a homeowner wants to take their existing loan obligation and replaces it with another loan that the new terms benefit the borrower. In this type of a refinance, homeowner may need access to extra funds as soon as possible, this type of loan enables the home refinancing process to be completed more quickly. This is achieved because the lender uses the original loan’s paperwork to refinance a home, thus the process ends up being shortened to a few weeks rather than a few months. This type of option has become more popular over time as anyone that has fallen underwater on their property would have little refinancing options available. However, this type of loan uses the original appraisal of the home which now makes it possible to refinance. Now, the borrower has ability to take advantage of not only lower interest rates but can now do away with a graduated payment mortgage (GPM) or an adjustable rate mortgage (ARM).
Risks of an FHA Streamline Refinance
Life is like the stock market in that it has its’ ups and downs. During the low times, people have a tendency to takes risks that they normally would not have taken. Whenever a person takes out a loan, there are always risks involved that the borrower and the lender should be made aware of. The same applies with this loan. Both the bank and the borrower are taking risks that the process works out in the end. One risk a bank takes is the possibility of having to foreclose on a home involved in this refinancing option. The fear is that a home which has to be foreclosed does not sell for more than is owed against it. This refinancing option benefits at-risk borrowers the ability to stay in their homes but there remains the issue of those who spend more for a home that they cannot afford. Also, the lender usually looks to see if the borrower has a source of income but not how much he/she makes. Those who are unemployed or living on Social Security Disability may meet the qualifications in order to refinance their home; however, the loan will be paid off at a slower rate. Being that I am someone who receives disability insurance, I can accurately say that the monthly payments does not last too long, so only the bare minimum due on the loan is all that can be paid. Realistically, a borrower would be better off living in a less expensive location.
Benefits of an FHA Streamline Refinance
Once a homeowner understands what this type of a mortgage is and risks that are involved, it is time to see how this option can be beneficial. The immediate benefit is that it is not too difficult to qualify for. In fact, changes were made recently by the FHA where they did away with average verifications to secure a home mortgage. Today’s FHA official mortgage guidelines state the following in regards to an FHA Streamline Refinance:
- Employment verification is not required.
- Income verification is not required.
- Credit score verification is not required.
Also, a homeowner does not have to worry about getting their home appraised. Once all of that has been soaked in, it is no wonder why this option is popular for those looking to refinance.
When a homeowner considers refinancing their home, there are several options to choose from. One that seems to be the most popular is known as an FHA Streamline Refinance loan. This option allows the borrower to have the paperwork completed in a matter of weeks instead of a few months; so, time and money are not wasted. Also, the qualification process is quicker as the new guidelines for FHA’s mortgages makes being accepted for the new loan that much easier. If you are to break it down, a homeowner could be unemployed, have little or no income, a credit rating that is less desirable and have no equity on their current home; yet, have a strong chance to be approved for this type of a loan. With all of that said, if you are a homeowner who feels refinancing is something you might want to consider, speak with a lender to remind you how this type of a refinance can be beneficial for your current situation and beyond.