Intended to make refinancing of FHA loans more convenient and efficient, FHA Streamline refinancing is one of the most beneficial options for homeowners. This is a faster, easier way to get the loan you need, all with less paperwork, fewer qualification requirements, and a much shorter timeframe from start to finish.
This type of refinancing is available only to people who have an FHA loan. Basically, it’s FHA-to-FHA, as the new loan on your home will be insured by the Federal Housing Administration as well.
While it won’t be available for everyone (only qualifying borrowers with FHA loans), this can be one of the most important refinancing options for your home.
FHA Streamline Refinancing: Why You Should Use This Option
Why Choose FHA Streamline Refinancing?
The main benefit for FHA Streamline refinancing is that there will be a simplified, speedy approval process. Many of the traditional refinancing steps are taken out; the final result is that you can complete the refinancing process in less time than it would take with other options. There is less paper work, fewer required documents, and lenient qualification requirements.
Perhaps the most attractive benefit to buyers, FHA Streamline refinancing can be completed without an appraisal on your home. Instead of having an appraisal, which takes time and money, the lender will simply use the previously-stated value of the home. This can be especially important if the value of your home has declined, which is rare but does happen. Lenders use the home value for many purposes, but it’s most noticeable on the loan-to-value ratio.
If you qualified for an FHA loan in the past, you should be eligible for FHA Streamline refinancing. In most cases, the lender can simply use the information used to qualify in the past as your current qualifying information. For example, if your credit score has declined, you’ll be able to use the previous credit score on file with the FHA.
With FHA Streamline refinancing, you may be able to roll the costs of closing the new loan into the loan balance. Closing a loan can cost thousands of dollars, and many people don’t have the financial reserves to pay for this service upfront. By rolling closing costs into the loan balance, more loans are available to buyers.
Requirements for FHA Streamline Refinancing
The first requirement is fairly obvious: your current home loan needs to be an FHA loan. If you meet this requirement, you can then move on to the next step.
To be eligible, you need to be current on all your loan payments. If your mortgage has any unpaid bills, you will have to get your loan current before you can move into FHA Streamline refinancing.
One of the requirements from the FHA is that your loan must be “seasoned.” This simply means that you must have held the loan for a certain period before it can be refinanced. To be seasoned, you must have had the loan for at least 210 days and made at least six monthly payments.
The FHA also has a requirement related to “net tangible benefit.” Basically, you and the lender need to prove that the new loan will bring a significant financial benefit. Exactly how this benefit is calculated will vary, but basically you need to save money after the loan has been provided. Also, the loan you acquire through FHA Streamline refinancing cannot exceed the amount you borrowed on the original loan. Even if you would be eligible for larger amounts with other programs or a new FHA loan, if you choose the Streamline option, you can’t exceed the previous amount. For example, if you previously borrowed $200,000, that will be the limit for your refinancing.
Required Documents for FHA Streamline Refinancing
FHA Streamline refinancing is intended to be a quick, convenient solution, but there are still documents that you’ll need to provide for the lender.
To verify your financial footing and income, you’ll need to provide at least two months of bank statements. These will be used to prove that you can afford the new loan.
Because most of the refinancing details are based on the previous loan, you’ll need to provide information on your current mortgage. Make sure the document you provide shows the loan balance, remaining payments, terms, and interest rate. Bring a copy of your mortgage statement and any other information you have related to your current loan.
You will also need to bring information related to your home insurance. The lender needs to see that your home is properly insured, as uninsured homes create financial risk.
Should You Choose FHA Streamline Refinancing?
So are you the right borrower for FHA Streamline refinancing? First, you need to make sure that you meet the basic requirements, including having an FHA loan on your home that you have held for at least 210 days.
Refinancing in general is a good idea if you have a high interest rate on a mortgage loan that still has a lot of time left until repayment. With refinancing, you can take advantage of better interest rates (possibly) or extend the terms so your monthly payment is lower.
Because there is no appraisal requirements, Streamline refinancing may be beneficial if the value of your home has declined. With other refinancing options, an appraisal may be required; if your home has dropped in value, the terms could be undesirable or you could be completely rejected. This won’t be a concern if you can simply use the previous value of the home, which is possible with FHA Streamline refinancing.
Finally, it’s only beneficial for people who don’t need cash-out refinancing. With the Streamline option, your equity into usable money, so if you need cash-out refinancing, you’ll have to look at an alternative program.
Quality Service for Affordable Refinancing
Want to learn more about FHA Streamline refinancing? Contact the staff at San Diego Purchase Loans and we’ll make sure you have the right information to make a fully informed decision.
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Chad and his team was awesome throughout the entire process. They made things easy and smooth, and able to answer any questions at anytime. By far the best experience with a lending team yet. Great job!”
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I really enjoyed working with Chad Baker and the rest of the team. This was our first time buying a home in California and we started with unnecessary assumptions based on our previous experience as home-owners in a different state. Chad and his team were available throughout the whole process, explaining the state differences, answering all our phone calls and emails quickly and directly, and providing detailed weekly status reports so that all parties including agents knew exactly where we were in the process. Chad was very experienced and provided customized loan products for us to consider, which definitely facilitated our transaction. I recommend the Chad Baker team! ”
As a first time home buyer, I wasn’t sure what to really expect, but Chad and his team made the process very clear and easy. Once the process was over, they didn’t just vanish either. They kept in touch and looked for opportunities that may benefit me. A couple years later, they found me a great refinance opportunity that saved me a lot of money! Once again, the process is long and grueling, but Chad and his team made it as painless as could be. Any barrier that I encountered, they found a quick solution to make it happen. Mortgages are a huge commitment and I wouldn’t pick any other team to help me make the right decisions.”