Do you want to refinance your FHA loan to get a lower rate and lower your monthly payment?
You can with an FHA streamline refinance..
In fact homeowners save $150-$250 on their monthly mortgage payment.
No credit check, so having bad credit is okay.
But those aren’t the only benefits of streamline mortgages..
In this article we are going to discuss all the benefits and requirements of FHA streamline refinances.
What is an FHA streamline Refinance?
The FHA streamline refinance was created by The Federal Housing Administration. It allows FHA borrowers to refinance their mortgage quickly. They do not require a credit check, appraisal, income verification, or any money out of pocket. They require less paperwork and conditions for a speedy loan process.
Homeowners can get a streamline refinance to take advantage of todays low interest rates, and lower their FHA MIP (mortgage insurance premium). The average borrower saves between $150-$250 a month.
With mortgage rates on the rise in 2017 now may be the best time to looking into a refinance.
Key Benefits of the FHA Streamline Refi
- An appraisal is not required
- No check check
- No income verification
- Minimal documentation required
- Lower your interest rate
- Lower your MIP payments
- No pre-payment penalty
Streamline Refinancing Requirements
To qualify you must have an FHA loan and have not had more than one late payment in the last year if the mortgage is at least 1 year old. If you received your mortgage within the last 12 months, no late payments are permitted.
There is a 210 day waiting period from the time you closed on or refinanced your FHA loan in order to be eligible. Since there is no income verification, no W2’s or pay check stubs needed. You can qualify if you have a low income, or even being unemployed will not matter when you get an FHA streamline refinance.
- If loan is less than 1 year old you can have no late payments
- No more than 1 late payment is loan is over 1 year old
- There is a 210 day waiting period to apply for a streamline refinance after closing on your home
- You do not have to have any equity in your home
- No appraisal required
- No credit check or income documents
- Refinancing must save the borrower money
No Credit Check
FHA Streamline refinances don’t require a check check. However, some lenders will pull your credit report and do have a minimum credit score. There are many lenders that do not check your credit, if your refinance is denied by one lender, you should continue to apply until you find one that can help.
Your new FHA mortgage should have more favorable terms than your current FHA loan. If your interest rate or mortgage insurance premium will not be reduced then there is no reason to do the refinance. The program has helped a number of people save thousands of dollars off their monthly mortgage payments.
You can be underwater on your mortgage
There is no maximum loan to value amount to qualify. If you owe more on your mortgage than your home is worth you still may qualify for a streamline refinance through the FHA.
When Refinancing your loan makes sense
- If your interest rate is higher than the current rates available.
- Your MIP fee percentage is higher than the current MIP rate of 0.85%
- If your home’s value has decreased
- You are struggling making your mortgage paymentsYou are underwater on your home
No appraisals are required with an FHA streamline refinance. Instead, lenders will use the value of your home at the time of closing. So even if your home is worth less than when you originally purchased it, it will not matter. Even if you are upside down on your home and owe more money than it’s worth you are still eligible.
How to apply
You should shop a couple of lenders to ensure you get the lowest fees and rate available. You can check with the current bank you have your mortgage with. However, it’s advised to get quotes from 3 to 4 different lenders to ensure you’re getting the best deal.
VA and USDA Streamline Refinance
Homeowners that have a VA or USDA loan can also qualify for a streamline refinance. You can read more about a VA streamline refinance here.
Lower your mortgage insurance payment
Many FHA borrowers are required to pay MIP for the life of the loan. The current MIP fee is 0.85% if you closed on your loan before the MIP change you can refinance to pay the lower mortgage insurance percentage.
- A loan-to-value ratio less than 90 percent is required to pay MIP for the first 11 years of the loan.
- Loan-to-value ratio greater than 90 percent will pay MIP for the life of the loan.
Note: The same rules apply to 15 yr fixed rate and 30 yr fixed rate mortgages.
Because FHA loans require MIP for a minimum of 11 years, if your current LTV ratio is 80% or less, than a conventional mortgage refinance may be a better option, because you would not have to pay MIP.
Refinancing from FHA to a Conventional loan
There are circumstances that some borrowers may find that a streamline refinance may not be the best option available. If you have a LTV of 80% or less than if you refinance your FHA loan into a conventional loan. With Freddie Mac or Fannie Mae, you would not be required to pay MIP or PMI.
There is a larger upfront cost when refinancing into a conventional loan. Typically the closing costs are between 2%-5%, if your loan amount is $200,000 and your closing costs are 3%, that’s $6,000 upfront. However, over the life of the loan you will save more than $6,000 by avoiding PMI.
Conventional loans do have much more stringent requirements than FHA streamline loans do. For one, you will need a minimum credit score of 640. You will have to be able to proof your income using W2’s, tax returns and pay check stubs. If you ‘re able to meet the requirements, a conventional loan will be a cheaper option than FHA.
Current FHA upfront mortgage insurance premium MIP rates
The current upfront mortgage insurance premium is 1.75 basis points, or 1.75%. This is a fee you will pay upfront, however you are not required to pay in cash, it can be added into your loan. You can get a refund on the original upfront MIP payment if it has been less than 3 years since you original got the FHA loan.
An FHA streamline refinance can lower your monthly mortgage payment and save you thousands over the life of your mortgage. This is due to lower interest rates and mortgage insurance savings means more money in your pocket.
Because FHA streamline refinances offer many benefits and they are very easy to qualify for. Getting a streamline refinance is a no brainer that every homeowner with an FHA loan should apply for.
If you’re concerned about the time and effort it may take to refinance , you shouldn’t be. Very few documents are needed and the refinance can go through very quickly. The requirements for an FHA streamline refinance is minimal. No credit check, no income verification, and an appraisal isn’t needed. Streamline refinances are something every FHA borrower should look into. It will definitely be worth the effort when you’re saving thousands of dollars.