Refinancing an FHA Mortgage: Streamlining
the refinance process
The FHA has what is called a streamline mortgage refinance
program that allows you to refinance your mortgage with a
minimum of paperwork. In most cases there is no cost to the
borrower to refinance, there is no face to face interview,
and there is no need for a property appraisal and there is
no need to verify your income.
In order to qualify for the streamline program your mortgage
must, first of all, already be FHA insured. That’s the
first requirement. Second, you mortgage must be current –
that is to say that you must not be behind in any payments.
Third, the refinanced mortgage must result in a lowering of
the borrower’s monthly principal payment and interest
payments – in other words, the new loan must be at a
lower interest rate than the original loan. And the last requirement
is that the borrower must not take any cash out of the deal.
Many lenders offer a “No Cost” FHA streamline
loan. Calling the loan a “No Cost” loan is somewhat
misleading. “No Cost” loans actually cost as much
(or even more) as other loans. What is meant by a “No
Cost” loan is that there are no up-front costs to the
borrower. Typically with a “No Cost” loan the
lender bumps up the interest rate slightly and recoups his
lending costs over the life of the loan. In many cases this
can actually end up costing you more over time than you would
have paid if you’d taken a lower interest rate and paid
all costs up-front.
Another way lenders offer “No Cost” FHA streamline
mortgage refinance loans is to add the loan costs into the
amount of the loan. When costs are paid in this way the FHA
requires that an appraisal be made of the property to insure
that there is sufficient equity to collateralize all of the
costs.
FHA streamline mortgage refinance loans can be made with
no appraisal as long as the new loan amount does not exceed
the original loan amount.
FHA streamline mortgage refinance loans made on investment
properties – investment properties are defined as any
property which is not the primary residence of the borrower
– can only be for the amount of the original loan or
for a lesser amount.
If you have a loan that is currently insured by the FHA and
your goal is merely to lower your monthly payments –
and not to take out any cash – then an FHA streamline
loan will save you time and money.
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