Just thinking about the paperwork, back and forth calls with your lender, and the fees involved is enough to make you think twice about refinancing. But if you have a home loan that’s guaranteed by the FHA or Federal Housing Administration, you might be in luck since you could avoid all the stress that comes with a regular refinance if you could qualify for the FHA streamline refinance. Before diving in, however, here are some basic things to know about this refinance opportunity to figure out if it’s right for you.
The FHA Streamline Refinance Program in a Nutshell
This special refinance program is specifically developed to aid homeowners to save some money and time on refinancing because unlike regular refinancing, there’s less paperwork involved and the underwriting period is also shorter, notes an experienced loan officer in Utah. When applying for an FHA stream line refinance loan, you don’t need to verify your credit score, income, or employment. Also, you don’t need to have your home appraised.
Do I Qualify for The FHA Streamline Refinance Program?
To be eligible for the program, you must satisfy these basic requirements:
- Your mortgage needs to be insured or guaranteed by the FHA.
- Refinancing should make financial sense for you. The FHA states that the streamline refinance should result in either conversion of your adjustable-rate home loan to one that’s fixed-rate or a decrease in your monthly mortgage payments. Your mortgage balance shouldn’t increase because you refinanced and you can’t take out a streamline refinance for cashing out your home equity.
- You must not be late on your payments you need to have had your home loan for a minimum of 210 days.
Mortgage Insurance Still Applies
Since you already have an FHA loan, you’re aware that you need to pay for upfront and yearly home loan insurance premiums, and this still applies when you refinance. If your current FHA loan was taken out before June 1, 2009, you need to pay a 0.01% of your mortgage amount upfront. The yearly premium is 0.55% of the amount you originally borrowed. You could cancel the insurance payments when your loan balance dips below 78%. But if you obtained your FHA loan after June 1, 2009, you would need to pay higher yearly and upfront premiums. Likewise, if your LTV or loan to value ratio was less than 90% during closing, you could cancel the insurance payments after 11 years, but if it was more than 90%, you have to continue paying it until you’ve repaid your entire mortgage balance.
Should You Go for The FHA Streamline Refinance?
While there’s no shortage of refinancing options available to you, if your home loan is already FHA-insured, the FHA streamline might be the most viable option for you. But you should still look around and discuss your options with different lenders because additional requirements, apart from those mentioned above, differ from lender to lender. And although refinancing your mortgage might come with some stress, the savings you stand to gain would be worth it all.