The FHA has allowed streamlined refinances since the early '80s to help lower the amount of a person's monthly mortgage payment and quickly, an FHA streamline refinance is an option. While the federal government offers a number of loan programs, this particular one is popular in that it can be secured very quickly. Therefore, anyone with an FHA or VA mortgage loan, one that is in good standing, would find it easy to qualify for a refinance loan to lower payments.
Known as a "fast track" option, the FHA streamline refinance loan is designed so the underwriting process associated with mortgage loans takes less time. However, this does not mean that there are no costs involved with the refinance. There are basic requirements that must also be met including:
Refinance
o The mortgage must already be FHA insured
o The mortgage must not be delinquent
o The refinance will lower the borrower's monthly principal and interest payments
o No cash can be taken out during the process
Using lower interest rates currently being offered, lenders can ultimately decrease the monthly mortgage payment. For a home with 18 years or more of payments still left, the refinanced loan would go back to a 30-year payoff. However, for loans with 12 years or less until maturity, the life of the loan would be based on the original loan's maturity date.
In addition to people enjoying lower mortgage payments, one of the benefits for an FHA streamline refinance is that the property may or may not need to be appraised. The purpose of using the refinance loan setup without an appraisal is to reduce the amount of the monthly mortgage payment. In this case, the homeowner would not be able to take any money out of the home's equity whereas refinancing with an appraisal would allow the homeowner to withdraw cash.
The rules for an FHA streamline refinance are somewhat different if the property is considered an investment. An investment property is a property that the borrower does not actually live in. In a situation such as this, the only amount that could be refinanced would be the balance of the existing loan and can only be refinanced without an appraisal. In addition, the amount of this type of refinance loan could only exceed the standard limitations for an FHA or VA loan.
Depending on the lender of an FHA streamline refinance loan, some offer loans with no associated costs but sometimes, these loans might have a higher interest rate. This simply means that there is no out-of-pocket cost associated with the FHA streamline refinance at the time, but the homeowner eventually pays for those costs overtime by paying a higher interest rate on the new loan. The premium received by the lender is used to pay the closing costs on the newly refinanced loan.
The bottom line is that if a homeowner makes payments on time and at some point wants to refinance, the opportunity would exist with an FHA streamline refinance loan.
Understanding an FHA Streamline Refinance
Sean Safholm, CalPERS Direct Lender http://www.calstatelender.com
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