FHA Loans: Different Loan Programs to Choose From
The FHA streamline program works with FHA homeowners to refinance their homes for lower interest rates and a corresponding lower monthly payment. There are lenient requirements for credit and documentation. To attract current
To further entice FHA mortgage holders, the program offers an upfront mortgage insurance premium refunds. A portion of the premium paid on your original FHA loan closing is applied to the new streamlined loan.
There are many benefits that help the process go quickly, including:
- Employment verification isn’t required
- Income verification isn’t required
- Credit score verification isn’t required. This makes it possible for borrowers with FICO scores under the 640/620/580/500 thresholds eligible for streamline refinancing.
- Appraisals aren’t required, which can save borrows hundreds of dollars.
Are You FHA Refinance Eligible?
The FHA Streamline Refinance program doesn’t require all the verifications of traditional loans, but there are other requirements to be eligible, including:
- Perfect payment history for three months
- It must be at least 210 days since your last refinance
- The refinance must serve a valid financial purpose, such as getting a better interest rate. There’s a calculation governing this requirement; the refinance must reduce your combined rate by at least 0.5%.
For example, a borrow with an FHA loan opened in June 2014 at 5.00%, and a monthly mortgage insurance premium of 1.35% has a combined rate of 6.35%. If the refinance would net a 5.85% combined rate, it meets the net tangible benefit requirement.
- There’s no cash-out offer available since the main purpose is to drop your payment and rate.
FHA streamline document checklist
Gather the following documents to make sure your FHA streamline refinance goes smoothly:
- Mortgage notes of any current FHA loan— it should show your current loan type and nterest rate
- Current mortgage statements
- Final settlement statement or Deed of Trust showing the case number of your current FHA loan
- Contact information of your HR department to verify employment (not income)
- Bank statements for the last two months, including blank pages to verify you can pay any out-of-pocket costs
- Contact information of your HOA to verify insurance on your home
You Can’t Roll the Loan Costs into the Balance
The FHA doesn’t allow extra money to be tacked onto a Streamline Refinance, so you’ll need to cover any closing loan charges.
The new loan balance can be for a maximum dictated by the following formula: Principal Balance + Upfront Mortgage Insurance Premium.
The origination, title, and escrow charges must be either waived by the lender or paid by the borrower. When it’s paid by the lender, it’s called a “zero-cost FHA Streamline”.
Check Today’s FHA Streamline Rates
Keep track of the most recent FHA rates to time the refinance for maximum savings. The FHA streamline refinance program is the perfect opportunity for FHA homeowners to reduce their interest and monthly payments.
The easier documentation and credit requirements make it a hassle-free process that gives you extra money in your monthly budget.