Did you know there is a mortgage refinance option that doesn’t care about the value of your home, your current income or employment, or even if you have not paid debts, other than your mortgage, on time? There is, and it is called a FHA Streamline Refinance. If you currently have an FHA mortgage and are looking to reduce your interest rate or monthly payments, this loan may be an option for you. There is even talk that this option may be available in the future to those who do not have a FHA mortgage currently. Even VA has a similar loan option. So even if you don’t have a FHA mortgage, this post could save you money.
Streamline Refinance
Here is an excerpt from the FHA mortgage guideline book, explaining what the purpose of a Streamline Refinance is:
Streamline refinances are designed to lower the monthly principal and interest payments on a current FHA-insured mortgage and must involve no cash back to the borrower except for minor adjustments at closing not to exceed $500.
There are two options available for FHA Streamline Refinances, and the guidelines vary on your choice:
- Refinance without an appraisal
- Maximum mortgage amount will be the lower of the original principal balance on the mortgage plus the new upfront mortgage insurance premium charged on the refinance or the sum of the existing FHA mortgage, closing costs, reasonable discount points and the prepaid expenses
- This option is best for those that have paid down their FHA mortgage balance enough to be able to cover the closing costs in the loan, or have the cash to pay for the closing costs themselves
- Refinance with appraisal
- Maximum mortgage amount will be the lower of 96.5% of the appraised value plus the upfront mortgage insurance premium or the sum of the existing FHA mortgage, closing costs, reasonable discount points and the prepaid expenses
- This option allows you to include the closing costs of the refinance into the mortgage if the value of the home has increased enough to cover those costs
What If My Credit Isn’t Good?
Life happens, and sometimes you are not able to make all of your payments on time. You might be struggling to pay all of your monthly obligations and refinancing your mortgage would provide an opportunity to lower your monthly payment and get back on track, right? FHA Streamline Refinances are no credit qualifying refinance transactions. Right from the FHA guideline book it states,
We do not require an appraisal, termite inspection or credit report on streamline refinances
What I can tell you is that lenders typically verify that you have made on time payments on your mortgage for the previous 12 months. Most lenders verify this by running a credit report from one of the credit bureaus to show no late payments on your mortgage and completely disregard the remainder of the report.
Income and Assets
Lenders don’t even care what your income or assets look like either. According to FHA,
Borrowers are not required to provide evidence of cash to close
AND
the sections [of the loan application] regarding income, assets and debts and obligations need not be completed
The purpose, as I showed above, is to reduce your monthly mortgage payment. If we can do that, then we don’t really care about the rest.
Sounds Too Good To Be True??
This is one of those loan options that sounds just too good to be true…but it isn’t. If you think you might want to take advantage of this loan option or discuss whether or not you qualify for this loan, contact a lender today. If you have questions, I would be happy to talk with you and help you determine if you are eligible for this great refinance loan.
Lending a Hand,
Scott Wynn
