If you’re thinking about refinancing your mortgage and you currently have an FHA loan, then an FHA Streamline is a smart place to start.
An FHA Streamline is a unique loan program for homeowners with an existing FHA loan. This “low-doc” refinance program allows you to quickly and easily refinance your current FHA mortgage without having to verify your income or credit and doesn’t require a home appraisal.
Home loans insured by the Federal Housing Administration (FHA) can make it easier for you to qualify to purchase or refinance a home. This loan option offers flexible qualification guidelines to help people who may not be eligible for a conventional mortgage.
How an FHA Streamline Works
In many ways, an FHA Streamline is like any other mortgage refinance. You can get a fixed-rate or adjustable-rate mortgage. You can select a 30-year, 20-year or 15-year mortgage.
The critical difference is the streamlined part.
Because you already have an FHA loan and have been through the process of qualifying your home and finances when you bought your home, an FHA Streamline does not require you to recover this same ground again.
Another advantage of an FHA Streamline is that you can refinance your home without having a lot of equity in your home, like most conventional refinance loans require.
Unlike most refinance loan programs, the FHA Streamline does not require an appraisal. Instead, FHA uses your home’s original purchase price as the house’s current value. This unique feature allows you to refinance for a lower rate and payment without having to worry about the value of your home or the equity you have in it – even if it is worth less than your current mortgage.
Another advantage of the FHA Streamline is the low documentation requirements. You don’t need to go through all of the verifications other mortgages require.
Here are a few things you get to skip:
- Employment verification is not required with an FHA Streamline Refinance
- Income verification is not required with an FHA Streamline Refinance
- Credit score verification is not required with an FHA Streamline Refinance (though most lenders will check credit)
This type of FHA loan’s primary goal is to help homeowners stay at the lowest rate and payment loan possible.
Are you eligible for an FHA Streamline?
Despite all the FHA Streamline Refinance’s simplicity, there are some qualifying standards to this particular loan type.
Here are a few things that you will need to show to qualify:
- At least 6 months of on time payments by the borrower on the FHA-insured mortgage that is being refinanced
- At least 6 full months have passed since the first payment due date of the mortgage that is being refinanced
- At least 210 Days has elapsed since the Closing Date of mortgage that is being refinanced
- If the borrower assumed the mortgage that is being refinanced, they must have made 6 payments since the time of assumption
- A clear monetary benefit to refinancing
- That you can lower your interest rate by at least .50% in most cases
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FHA Loan Programs
FHA’s adjustable-rate mortgage (ARM) insures home purchases or refinances with rates that can change after the initial fixed-rate period. Depending on market fluctuations after this initial fixed-rate period, your monthly payments could vary due to rates increasing or decreasing. An ARM could be the right choice for you if you plan on staying in your home for just a few years, you’re expecting a future pay increase or the current interest rate on a fixed-rate mortgage is too high.
Fixed-rate mortgages protect you against rising rates since the interest rate remains the same for the loan’s entire term. You can select a 30-, 20- or 15-year term with FHA loans. The main difference is that the lower term options have higher monthly payments, which means you are building home equity faster. Keep in mind you can use equity as a down payment for your next home or a future cash-out refinance. If you plan on staying in your home for a longer time frame, a fixed-rate mortgage could be the right solution for you.
If you currently have an FHA mortgage, we may be able to help you reduce your interest rate and lower your monthly mortgage payments with an FHA streamlined refinance. Plus, a streamlined refinance requires limited borrower credit documentation and underwriting for a more painless process. An FHA Streamline Refinance may be the right solution if you want to convert your ARM to a fixed-rate loan.