FHA Streamline Refinance enables homeowners to refinance their federal loan mortgages even if what they owe is double the price of their home. It makes the process of refinancing much quicker because of less documentation and underwriting the lender has to perform. However, it does not mean that there are no costs involved in the transaction. It comes as a fixed rate pay plan of a term 15 years or 30 years, and homeowners will incur no penalties based on having underwater mortgage. For people with little debt, this method works wonders because you can use a bit of extra money to go towards other things. Here are some facts to note before going with a federal streamline refinancing program.
Do homeowners have to verify job, income, or credit?
The interesting thing about FHA Streamline Refinance is homeowners do not have to verify either of these factors. If you have horrible credit, currently out of work, or don’t want to report your income, you can still get qualified for this program. Your pay stubs, W-2s or tax returns are not required for approval. Additionally, your credit score is irrelevant – it doesn’t matter if you have a score below 500. However, you should always take into account what your lender deems acceptable. The point of a federal administration is to insure a loan. By setting a lower mortgage rate, there’s less chance of defaults.
How do you become eligible for a FHA Streamline Refinance?
It may seem as if it’s quite simple to sign up for this program (it is in certain cases), but there are still some rules to follow as far as considering your request. One thing is to note is a perfect 3 month payment history. Risk is a factor that the federal administration likes to limit as much as possible. For a streamline refinance, a 90 day record of on time payments show a sense of trust. Make sure mortgage is current and not in a phase of delinquency. One late payment is allowed in the last 12 months of payment. Another requirement of this program is a 210 day waiting period between refinancing and this includes the close out dates. 6 mortgage payments must be made. Additionally, you must have a good reason for this type of refinancing (net tangible benefit), and not just to pay your own personal bills.
The difference between FHA Streamline Refinance without appraisal and with appraisal
You are not required to have an appraisal in a lot of cases with your streamline refinance program. However, you may find an advantage for getting appraisal such as being able to roll your closing costs into the loan. You are only required to have an appraisal if your new loan amount exceeds your original loan amount by 1.5%. If you choose not to get an appraisal, you won’t be able to roll your closing costs into the loan. Borrowers do have an alternative method if they can’t pay out of pocket. The lender can impose a “no cost” refinance by charging a higher rate of interest on your loan rather than financing or paying the closing costs in cash. As far as streamline refinance is concerned, the federal government doesn’t allow lenders to add closing costs in the new mortgage amount. This includes costs such as origination charges, title charges, and escrow population. Also, if a borrower gets an investment (or any property not used for primary residency) it can only be refinanced without an appraisal. In any case, you should shop around to find the best mortgage rates and fees for your individual needs as well contact approved lenders.
What are some FHA Streamline Refinance Mortgage Insurance Requirements?
Seeing as this type of mortgage is insured by the federal government, there are two main insurance fees a borrower must pay. Borrowers must pay an upfront mortgage insurance payment at closing and an annual payment split into 12 installments, which is paid with your mortgage payment each month. Homeowners using streamline refinancing are split between two classes. The first class involves homeowners whose new loan replaces a federally backed mortgage endorsed prior to June 1, 2009 and those whose new loan replaces a federally backed mortgage endorsed on or after June 1, 2009.
A streamline refinancing plan will certainly help homeowners bypass the verification process as well as lower their monthly payment rates, which means lower default rates. A good plan and finding credible lenders will create a more ideal setting for homeowners and mortgage companies.
Learn about the Do’s and Don’ts of an FHA Streamline Refinance.