FHA Streamline Refinancing is a mortgage refinance option that lowers your monthly mortgage payments and interest rates if you already have an FHA loan. The FHA Loan is guaranteed by the Federal Housing Administration which means if a homeowner defaults, the government can cover the losses for the banks. This allows lenders to give more generous loan terms since the risk is removed from the lender. In return, homeowners can usually receive more lenient credit requirements and lower down payments. Despite the great terms of an FHA loan, borrowers will find there are several benefits to refinancing an FHA loan down the road.
FHA Streamline Refinancing Benefits
FHA Streamline Refinancing offers several great benefits for homeowners looking to save on their mortgage. These benefits include:
- No Appraisal Needed: Most standard refinance loans require a house appraisal to ensure the homeowner’s house exceeds the loan amount. With FHA Streamline Refinancing homeowners can use the original purchase price for their current home’s value. This means that homeowners can refinance even if their home’s value has gone down.
- No Credit Score Verification: FHA Streamline Refinancing requires less documentation and that means less verification. A low credit score or even unemployment will not stand in the way of a homeowner saving money when doing FHA Streamline Refinancing.
- Quick Turnaround: Another benefit of having less documentation means less paperwork so the turnaround time can be as little as two to three weeks.
- Affordable Rates: The goal of refinancing is to replace a current loan with a new mortgage that has better terms and rates. FHA Streamline Refinancing allows homeowners to get more affordable rates.
Who Should Get an FHA Streamline Refinance Loan?
Even if a homeowner has an FHA loan, they may eventually want better terms. This is where FHA Streamline Refinancing comes in. FHA loans can have higher interest rates to begin with. By refinancing, homeowners can pay off the loan faster or even pay lower monthly payments. If a homeowner has an adjustable rate, a new loan can be applied for to change it to a fixed-rate loan. This makes the loan more predictable so that it never changes.
To be eligible for FHA Streamline Refinancing, homeowners must already have an FHA loan. They must also be current on their existing loan and have made all payments on time in the past year. The property must also be owned for at least six months before refinancing. An appraisal loan must not be greater than the current loan and closing costs must be paid upfront or agree to a slightly higher interest rate to cover the closing costs.
Homeowners cannot take out an FHA Streamline loan resulting in a net tangible benefit such as changing an adjustable-rate mortgage to a fixed-rate mortgage or lowering their monthly payment by at least 5%. This means no matter what when you take out an FHA Streamline refinance loan, you’ll enjoy great benefits.
At BrightPath, we offer a wide range of loans and other mortgage loan products. Applying to refinance a loan can be confusing, but we’re here to help you make a seamless transition.
Contact us today to learn more about FHA Streamline Refinancing and other mortgage options.