FHA Streamline Refinance Program
FHA backed loans provide homebuyers with the unique opportunity to purchase a house with flexible terms, a lower interest rate, and down payments as little as 3.5%. In addition to offering original loans, the federal government through FHA allows borrowers to refinance their mortgages. The FHA Streamline Refinance Program has been a popular financial tool for many homeowners over the years.
Generally speaking, an FHA streamline works much like a conventional refinance program, but with some significant additional benefits. Let’s look at the provision of refinancing your mortgage under the FHA Streamline Program.
Flexible Loan Terms
Under the FHA refinance program, homebuyers can choose between a 15 or 30-year loan term. Also, the interest rate can be either fixed or adjustable, based on the borrower’s preference. Should someone want to pre-pay their mortgage off early – that is no problem. There is no penalty to do so.
No Home Appraisal Needed
One of the main differences between a conventional refinance and one through the FHA is that the FHA program does not require that a home be appraised to qualify for the streamline refi. Additionally, even if a house is underwater, meaning that more is owed on the mortgage than it is currently worth, a borrower could still be eligible for a lower interest rate due to the FHA refinance process.
Documentation Is Minimized
Another significant advantage of the FHA Streamline process is that approvals are relatively easy to obtain. It might sound hard to believe, but the FHA does not require employment or income verification as part of their eligibility process. Also, a credit report is not needed.
The logic behind this non- traditional approach is that the FHA does not provide the borrower the funds to buy a home. It is the bank or lending institution that does that. The FHA only guarantees the loan. The federal government does this because it is in society’s general best interest that homeowners get lower interest rates, so mortgage defaults are less likely to occur.
However, keep in mind that nearly all banks or lending institutions have their own minimum credit score requirements as well as other eligibility provisions for offering borrowers loans through the FHA Streamline Refinance program.
FHA Streamline Refinance Requirements
While income and credit verification are not part of the FHA Streamline process, the program does have some rules, including:
- Borrowers must have at least three months of recent on-time mortgage payments.
- There must be more than 210 days in between a new refinance and an existing FHA mortgage.
- The refinance process must show a clear benefit to the borrower.
- To move from a higher interest rate, the new loan’s interest rate must be lower by at least 0.50% than the current one the borrower is paying.
Loan Processing Costs May Not Be Added To Account Balance
One relevant provision that is important to keep in mind with the FHA Streamline refinance process is that refinancing costs cannot be added onto the loan’s balance. Such expenses as closing costs, appraisals, or title agent fees must be paid for by the borrower upfront.
Apply For An FHA Streamline Refinance Loan Today
The mortgage lenders at Better Lending have many years of experience helping our customers with the FHA Streamline Refinance process. There are many great benefits to this unique program. We are happy to discuss whether a refinance through FHA would be a good option for your particular situation. Contact us today to learn more about why so many customers have chosen us to be their trusted FHA lending partner.