FHA Streamline

Depending on your financial situation, how much equity you have invested in your mortgage and the current market interest rates, refinancing your mortgage loan could be a smart decision. The FHA Streamline allows current homeowners with an FHA loan to refinance if a lower mortgage rate is available. This process is typically faster than refinancing a non-FHA loan, closing costs tend to be lower, and credit standards are more lenient. FHA streamline is designed to help homeowners secure a better interest rate, reduce their overall mortgage payments, and pay off their Mortgage Interest Premium (MIP) faster.

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Advantages to FHA Streamline refinancing

There are many benefits to opting for an FHA streamline. The process is much easier and faster than the initial application for an FHA loan. When refinancing with the FHA Streamline, you will not be required to obtain an appraisal on your house, the original appraisal will be used. There will be no income documentation requirement because you will have been previously approved for the FHA loan. Even if your home has depreciated from its original value, and you own more on the loan than your home is currently worth, refinancing is still an option. Homes that are “underwater” are still eligible for FHA Streamline. The lender will use your income and credit rating data from the original loan, then repackage and resell you the loan at a lower interest rate. Remember to check on your MIP (Mortgage Insurance Premium) to see how they are affected by the new loan. When your monthly premium decreases, your MIP will decrease as well.

The cost of Refinancing

Typically, when you refinance a loan, you’ll be required to pay closing costs. With an FHA Streamline, closing costs may not be rolled into the new loan. Sometimes a lender will offer a “no-cost option” which eliminates the closing costs, but these options usually come with a higher interest rate on the loan and can cost more in the long run.

Unlike a traditional loan, the FHA Streamline doesn’t offer cash-back at closing. You are permitted to refinance for the remaining value of the loan. Even if your house has appreciated, you will not be able to borrow more than the remainder of the loan with the intention of receiving cash upon closing.

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Requirements and eligibility

In order to qualify for an FHA streamline, there are certain requirements you’ll need to meet:

  • The mortgage you are refinancing must be an FHA loan.
  • The home you are refinancing must be your primary residence.
  • You may not have had more than two late payments in the last 12 months.
  • There is no credit score required for the FHA streamline, but some lenders might request this as a part of their own policy.