Refinancing Your Way to a Better Rate

Mortgage rates are at a record low; and many mortgage holders are taking advantage of the low interest rates and refinancing their homes to obtain cash, or to lower their monthly payments. Homeowners with FHA loans may also qualify for a mortgage refinance.

The FHA streamline refinance program simplifies the documentation requirements for the borrower, and also simplifies the underwriting process for the lender. No appraisal is required. The new loan amount cannot exceed what is owed.

There are three main requirements for an FHA refinance: the mortgage being refinanced must be an FHA insured mortgage, it must be current, and the refinancing has to lower the borrower’s monthly payments. The streamline refinance does not allow cash to be withdrawn, it can only be applied to help lower payments.

In some cases, the lender will pay the closing costs for the refinance mortgage, but will charge a higher interest rate for the new loan than the borrower would otherwise receive. Or, the borrower may choose to pay the closing costs and roll them into the new mortgage amount, but in this case, an appraisal must be done to show that the home’s value has appreciated enough, to make sure that the new loan amount will not exceed the home’s value. In the case of an investment property, the investor may also refinance the home, but closing costs may not be included in the new mortgage.