FHA Streamline Refinancing Basics
The ever low mortgage rates have made 2015 the right for refinancing. Millions of homeowners have taken in the past years FHA home loans, and now they want to take advantage of the best mortgage interest rates, by refinancing the FHA mortgage. The FHA (Federal Housing Administration) has published the new guidelines for 2015 streamline refinancing.
The name streamline was chosen to emphasis that the refinancing process can be prompt with less paperwork, and in some cases with no appraisal needed. What guided the HUD (U.S. Department of Housing and Urban Development) is that homeowners would lower their monthly payments. The streamline refinancing is available to FHA mortgage borrowers only as you can see in the Mortgage Report:
The FHA Streamline Refinance program’s defining characteristic is that it does not require a home appraisal. Instead, the FHA will allow you to use your original purchase price as your home’s current value, regardless of what your home is actually worth today.
In this way, with its FHA Streamline Refinance program, the FHA does not care if you are underwater on your mortgage. Rather, the program encourages underwater mortgages. Even if you owe twice what your home is now worth, the FHA will refinance your home without added cost or penalty. See more...
Any other situation where the monthly payments are not reduced can not go through the streamline process. There are other FHA cash out refinancing or non cash out programs which mortgage holders can refinance current mortgage and change the terms to reach their needs.
Saving Money With Streamline Refinancing
Having low interest rates is the first step before you can save money by refinancing. There are numerous items that ought to be checked to find out if you will be saving money by the FHA streamline refinancing program. Like with all other FHA mortgages, the FHA does not lend the money, the lenders (banks and financial institutions) are the ones who determine the mortgage interest rates, and the conditions of the mortgage.
FHA Streamline Refinancing Qualifications
In order to proceed with the FHA streamline refinancing, you must meet these basic requirements as stated in the HUD official publications. As you will see customers who meet these streamline qualifications are the best borrowers, and they only are allowed the ‘fast lane’ refinancing. The minimum criteria are as followed:
- 6 Monthly Payments – The refinance mortgage must have at least six monthly payments, paid before the loan application is filled. Newer mortgages can be refinanced, but not in the streamline process.
- 100% On Time Monthly Payments – For mortgages with less than one year being refinanced, the borrower must be able to show that all 12 previous payments where completed with no delays and no late payments.
- Only One 30 Day Delay – Is accepted for mortgages which have been paid more than 12 month. On top of this, the borrower must not have a 30 day delay, within the last 3 month from the loan application submitted.
Other FHA Streamline Requirements
5% Reduction in Total Mortgage Payment – The FHA will check to see that the new refinanced mortgage payments are at least 5% less than current payments. The ‘Total Mortgage Payment’ mean that this is the actual sum being paid every month, and is including: principal, interest, taxes and insurances, homeowners’ association fees, ground rents, special assessments and more.
Streamline Refinance Credit Scores Required – The FHA is requesting the lenders to add the credit score they have to the application. If there is more than one FICO score available, they are requested to send them all. Having a low score can damage your chances for refinancing, the best advice is to raise your FICO score by using simple on-line programs (like the Credit Repair University guide used by thousands) which do not cost much.
Streamline Refinancing Appraisal
The FHA does not demand repairs to be done, except lead-based paint recovery (for safety reasons), on the other hand the lenders can request an appraisal report to be delivered by a certified FHA appraisal on the property. The lenders which are going to be the ‘real owners’ of the property (until mortgage is fully paid) may request the repairs to be completed! In this case the repair will be paid out of the borrowers own money.
The actual mortgage sum of money the FHA streamline refinancing will refinance may change according to the Streamline Refinance plan. When an appraisal streamline is done, the sum will be the Maximum loan-to-value percentages multiplied by the appraised value. When no appraisal is done the refinance mortgage will be the outstanding principal balance plus interest charged by the servicing lender.
If your credit score is less than optimal, get it fixed before you turn for FHA loan application.
So What Can You Do To Improve Your Situation?
If you will do nothing.. don’t expect anything to happen. The best advice is to bump your credit score up! It will give you better leverage when facing the lenders, and better negotiation position when applying for any financial need.
Lets not forget you are probably paying $500-$1000 extra per year in higher interest rates, and credit payments.
If your score is below 700, you might want to clean it yourself – get this ‘Credit Repair University’ which will save you money and time.
Yes, you might need to invest a small sum to get a grip of things.. But if you think education is expensive.. try ignorance..
You are probably paying thousands of dollars per year in fees and interests to credit companies which could be going straight to your pocket. Don’t be cheap when it comes to financial education..
Ignorance costs more.