FHA Streamline Refinance: Things You Should Know
Streamline refinances are easier than other types of refinances because their is no appraisal or credit report required
. The only time that this is not true is if the new loan amount exceeds the original loan amount, but if that is the case you likely won't qualify anyway. What makes a streamline refinance quicker and easier to obtain than any other type of refinance is the fact that their is little documentation needed to close on the loan.
Basic Requirements For An FHA Streamline Refinance
-Mortgage being refinanced must already be FHA insured
-The mortgage being refinanced may not be delinquent
-Borrower's monthly payment must be lowered
-No cash out
There are certain things that need to be taken into account when doing an FHA streamline refinance. First of all, the mortgage being refinanced already has to be an FHA approved first mortgage. There is no cash out allowed by the borrower, and the purpose of the refinance is to simply lower the borrower's monthly interest and principal payment. To provide for closing costs, there may be a minor adjustment in the no cash out clause allowing up to an additional $500 above the original loan amount.
The only repairs that are required to be completed when doing an FHA streamline refinance are those that deal with lead based-paint. If the lender requires any other repairs to be completed by the borrower they must be paid for out of the borrower's pocket.
FHA streamline refinances don't require an appraisal, but in cases where an appraisal is done, the maximum insurable mortgage is figured out differently.
Calculating the maximum insurable mortgage amount with an appraisal is the lesser of the following two calculations:
1. Maximum LTV(Loan-to Value) percentages multiplied by appraised value, excluding closing costs.
2. Sum of existing FHA first mortgage, accrued late charges, prepaid expenses needed for the escrow account, escrow shortages, closing costs and reasonable discount points minus any upfront MIP refund.
Without an appraisal, the maximum insurable mortgage amount is calculated by the lesser of the following:
1. Original loan amount with any upfront MIP and new UFMIP charges included.
2. Existing debt calculation, which is the same as number 2 above but also includes the expense of the new up-front UFMIP.
There are a couple of ways in which lenders can offer an FHA streamline refinance to a borrower.
-No Cost Refinances- No out of pocket expenses to the borrower. All expenses are paid by the lender. This will likely result in a higher interest rate than if the borrower had paid the expenses out of their own pocket.
-Closing Costs Included In New Mortgage Amount- If there is sufficient equity in the property as determined by an appraisal, then the closing costs can be included in the new loan. This can also be done without an appraisal as long as the new loan amount does not exceed the original loan amount.
If you already have an FHA mortgage and are interested in refinancing to lower your monthly payments, an FHA streamline refinance could be the simplest and fastest way to get your loan approved. While the basic requirements will be the same no matter what lender you choose, be aware that the fees and interest rates may be different depending on the lender.
FHA Streamline Refinance: Things You Should Know
By: Rob Blake
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