WHAT IS AN FHA STREAMLINE REFINANCE LOAN?
An FHA Streamline refinance loan is a mortgage refinance option that lowers monthly mortgage payments and interest rates for borrowers who already have an FHA loan.
WHAT IS AN FHA LOAN?
An FHA loan is a loan guaranteed by the Federal Housing Administration. Banks and other traditional lenders grant FHA loans, however, they are fully backed by the government. This means if the homeowner defaults, the government steps in and covers the losses for the bank.
FHA loans remove or reduce the risk for the lender, and as a result, the lender can offer better terms to the borrower. One of the biggest benefits of an FHA loan is that the borrowers usually pay low down payments, and the credit requirements aren’t as stringent as they are for some traditional loans.
WHO NEEDS FHA STREAMLINE REFINANCE LOANS?
In some cases, people with FHA loans may need even better terms, and in those situations, the best option is to apply for an FHA Streamline refinance loan. While FHA loans are a good option for lower down payments and less strict credit requirements this lenience can result in higher interest rates. When you choose to refinance your FHA loan, you can pay off the loan faster or even pay lower monthly payments.
Similarly, if your current loan is an adjustable-rate, you may want to apply for a new loan with a fixed rate. An adjustable-rate changes regularly and that can make paying off the loan unpredictable. When you qualify for a fixed rate, it never changes. This means you pay the same payment every month for the lifetime of the loan.
WHO IS ELIGIBLE FOR AN FHA STREAMLINE REFINANCE LOAN?
Apart from already having an FHA loan to be eligible for FHA Streamline, borrowers must:
- Be current on their existing loan, and have made all payments on time for the last year
- Own the original property for at least six months before refinancing
- Not take out a no-appraisal loan greater than the value of their current loan
- Pay closing costs up front or agree to a slightly higher interest rate to cover closing costs
WHY AN FHA STREAMLINE LOAN?
Provided they meet the requirements, an FHA Streamline loan can provide borrowers with many advantages. There is no income or employment verification, which speeds up the refinancing process considerably. An FHA Streamline loan can be particularly beneficial in areas where home values have not appreciated as expected. The refinance doesn’t require a home to be appraised, so borrowers can use the most recent appraised value.
WHAT ARE THE ADVANTAGES OF AN FHA STREAMLINE REFINANCE?
Borrowers cannot take out an FHA Streamline loan without it resulting in a net tangible benefit, such as lowering the monthly payment by at least 5% or changing an adjustable rate mortgage to a fixed rate one. In other words, if you take out an FHA Streamline refinance loan, you automatically enjoy benefits. If the new loan is not more advantageous to your financial situation, it cannot be funded.
Benefits of an FHA Streamline Loan include:
- No credit score verification: Since FHA Streamline refinancing requires less documentation, this means less verification for the borrower. Low credits scores or unemployment will not stand in the way from you saving money with refinancing.
- Quick turnaround: Less documentation with FHA Streamline refinancing means the turnaround can be as little as two to three weeks.
- No appraisal required: Borrowers can use the original purchase price for their current home’s value which means refinancing is still possible even if the home’s value has gone down.
If you think an FHA Streamline refinance loan is right for you apply online today or contact us over the phone.
At BrightPath, mortgage lenders in Georgia, we are ready and willing to help you. If you would like to explore FHA Streamline refinance options or other mortgage products available from BrightPath, please call us at 888-222-6003, or complete our simple form below. One of our experienced mortgage specialists will contact you and get you on your way to a brand-new loan that works for you!