As a homeowner, you strive to make the monthly mortgage payment and avoid any compromise. However, what if it was possible to lower that payment and even pay less than what has been anticipated over the duration of the loan term. In this case, an FHA streamline refinance could be the solution.
An FHA streamline refinance is simply the process where the borrower obtains a new FHA mortgage after taking the existing FHA mortgage that they are holding.. As opposed to a full refinance of the mortgage loan, it is a more efficient and consequently cheaper way of operation in terms of closing costs.
Benefits Of FHA Streamline Refinance
There are several reasons why you might consider a streamline FHA refinance:
- Lower your interest rate: In case the interest rates in the market are lower than those you paid when you borrowed your initial FHA loan, it may be beneficial to refinance in order to enjoy reduced monthly repayments.
- Reduce your monthly payment: A possibility of a lower interest rate also means a lower monthly payment on the loan, hence allowing you to spend the cash on other necessary expenses.
- Shorten your loan term: There is an option where you can adjust your loan to a shorter period if you desire early clearance of the mortgage. This will help reduce the amount of interest that will be charged on the loan in the future.
- Cancel MIP (Mortgage Insurance Premium) on future payments: Usually, borrowers are eligible to cancel the requirement to pay monthly mortgage insurance premiums or MIP going forward if they qualify according to specific conditions. It can save you anywhere between two to hundreds of dollars every year.
Types of FHA Streamline Refinance Loans
The Federal Housing Administration (FHA) offers two main types of Streamline Refinance options:
- Credit-Qualifying Streamline Refinance: This option entails a credit score and debt-to-income verification to ascertain the borrower’s suitability for a loan. This also remains in line with the underwriting process in normal mortgage refinance.
- Non-Credit Qualifying Streamline Refinance: The use of this type of refinancing has its name in that it does not call for any proof of your credit score or income. This is usually the case, especially when the borrower has a previous history with his or her current FHA loan.
Key features of an FHA streamline refinance
- Minimal paperwork: Since you’ve previously undergone the FHA loan process, the streamline refinance entails less paperwork.
- No appraisal required: One important thing to note here is that an appraisal is usually not necessary when performing an FHA streamline refinance, hence saving you time and money.
- Fast closing: FHA streamline refinances are generally less time-consuming than traditional loan refinances and can take as little as thirty days to complete.
Guidelines for FHA Streamline Refinance
One of the prerequisites to getting an FHA streamline refinance is that you have to meet some requirements. These requirements for fha streamline refinance include:
- You have to be in an existing FHA mortgage to be able to avail of the refinancing.
- You must have a good credit history.
- Required 210-day waiting period after buying or refinancing
- Debt to income has to be within certain parameters (reasonable).
- Your refinance must pass a “net tangible benefits” test
- You need to have a special need for refinancing, for instance, to lower the rate of interest or to reduce the period of the loan.
Rates for FHA Streamline Refinance
FHA streamline refinance rates are usually lower than that of the regular refinances. This is because the FHA streamline process, in general, is less complicated and less likely to cause losses for the lenders.
Check out rates as of September 12, 2024
And to get your personalised rate report, click here.
Closing costs for FHA Streamline Refinance
Like other FHA transactions, closing costs for an FHA streamline refinance of a mortgage loan are usually less than it is for a standard refinance. However, you will have to pay for some of the closing costs, these are:, Origination fees, Appraisal fees (where necessary), Title insurance.
Is an FHA Streamline Refinance Right for You?
Although getting an FHA streamline refinance is normally a good idea, it may not always be the best option depending on your situation. For specific information on FHA streamline refinances, it is recommended that you consult a professional mortgage lender like Munshi.Biz. They can assist you in deciding whether such a kind of refinance is suitable for you or not.
Here are some additional things to keep in mind
- There is a limit to the amount of cash you can come out within an FHA streamline refinance, and the amount cannot exceed $500.
- All said you will still need to pay mortgage insurance if you do not qualify to cancel MIP.
Conclusion
For homeowners who already possess an FHA loan, an FHA streamline refinance is one of the best options available for getting a better interest rate and paying less on their monthly installments along with saving for the entire period of the loan. If you are looking forward to refinancing your mortgage then you should not overlook an FHA streamline refinance.
Read More: The Refinancing Route: When and How to Refinance Your FHA Loan
