What is an FHA Streamline Refinance Loan?
An FHA Streamline refinance loan is a mortgage refinance option that can lower monthly mortgage payments and interest rates for borrowers who already have an FHA loan.
What is an FHA Loan?
Just to review, an FHA loan is a loan that is guaranteed by the Federal Housing Administration. These loans are granted by banks and other traditional lenders, but they are guaranteed by the government. This means that if the homeowner defaults, the government steps in and covers the losses for the bank.
These loans remove or reduce risk for the lender, and as a result, the lender can offer better terms to the borrower. In particular, borrowers with FHA loans usually pay low down payments, and the credit requirements aren’t as stringent as they are for 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. For example, if you want a lower interest rate, you may want to refinance. With a lower interest rate, you can pay off the loan faster or 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 on a regular basis, and that can make paying off the loan unpredictable. When you qualify for a fixed rate, it never changes. That 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 credit check, 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.
If you think an FHA Streamline refinance loan is right for you, apply today. You can apply online or contact us over the phone. At BrightPath, 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.