When you have a home mortgage that is insured by the Federal Housing Administration, you have an option that other homeowners don’t have. This is the option to have FHA refinance your mortgage by taking advantage of the streamline refinance, which is a much simpler way to complete the refinance process. While there are many different types of refinances available, the streamline has proven to be a refinance worth pursuing because of the financial benefits and because it is so much easier to complete. Here are a few things you should know before you jump into the process.
Why Are they Called Streamline Refinances?
When you hear about streamline refinances you may assume that this is a refinance that is easier and cheaper to procure than a standard refinance. If you assume this, you would be both correct and incorrect. This particular option is called the streamline because there is much less paperwork involved so the approval process is run through more quickly. To make it easier, for most of these loans a home appraisal isn’t required. This saves time and it can save a few hundred dollars. But that’s about all you will save. It is much less of a headache for a homeowner to pursue a streamline than it would be for him to pursue a traditional loan so yes, it is easier.
Financially, the streamline is going to hit your wallet about as much as a standard refinance would. The process for approval is easier and faster on a streamline, but the fees and closing costs are not waived in the process so you will have to pay most of these either at the time of closing or over time if you’ve rolled them into the loan. As mentioned above, the appraisal isn’t always required so you may save a few hundred dollars there. But overall, you will be paying about the same for this loan as you would for any other refinance. When you have FHA refinance your mortgage you are still required to pay the fees that come with it.
Learn more of what a Streamline refinance is as an option of an FHA refinance here.
What is Required to Have FHA Refinance Your Mortgage?
When you refinance a home you will always have requirements that have to be met before the loan will be approved. This is no different with the streamline. However, it is a federally insured loan so financially the requirements should be less stringent than those for a conventional loan.
To begin, the mortgage you are refinancing must be currently insured by the Federal Housing Administration. You must also have the home be your primary residence. This is required for nearly all federally insured loans. There are different loans in place through federally approved lenders for investors but the streamline is not one of them.
Financially, you need to be current on your home mortgage with very few, if any, late payments over the last 12 month period. You don’t have to have the perfect financial situation but having one that is decent definitely helps. More than likely when you submit a request for the streamline the lender will look at your payment history, your loan-to-value ratio, and your financial history before he will decide whether or not you are too risky to offer a loan to.
When streamlining your refinance you do so understanding that you cannot get cash back through this option. If you want a cash-out refinance you will have to go the traditional route either through a conventional or federally approved lender. In addition to this, the streamline was designed to make it easier for homeowners to meet their monthly mortgage and interest payments so if you go through the process and find at the end that your mortgage payment won’t be reduced, you more than likely will not be approved. It is required that the end result of this particular refinance be lower monthly and interest payments. However, in some cases you may still be able to streamline if you are switching your loan from an ARM to fixed mortgage. For these scenarios you will need to discuss all options with your lender.
While the streamline is great for many homeowners, you won’t want to decide on a particular refinance until you’ve talked to the professionals and determined which refinance will be best for you. Having FHA refinance your mortgage can result in lower interest and mortgage payments, but every refinance carries a certain amount of risk. Make sure you weigh all the pros and cons before you agree on any major financial decision.