FHA Streamline Refinance

The appraisal is one of the biggest hurdles that prospective homebuyers face when looking to obtain an FHA loan. Fortunately, an FHA streamline refinance helps to skip over that. This little shortcut can save you tons of time and money.

It is important to note that not everyone can take advantage of an FHA streamline refinance, though. Borrowers must meet specific conditions so that they can get a break when refinancing an original FHA loan.

What Is an FHA Streamline Refinance?

The FHA Streamline refinance program is exactly what it sounds like – a refinance program that provides homeowners with a streamlined refinance process. This means less time, less paperwork, and less hassle. You won’t need to go through the appraisal process with the FHA when using a streamline refinance either, as the property has already been valued by the FHA.

There are two different types of FHA streamline refinances, including credit qualifying and non-credit qualifying.

FHA Streamline Refinance
FHA Streamline Refinance

Your lender must perform a credit check on a credit-qualifying refinance, as well as calculate your debt-to-income ratio, to decide whether or not you will be able to continue paying your mortgage.

You don’t need to fulfill these requirements with a non-credit qualifying refinance, though there are a few circumstances where it could be helpful.

If you need to remove a borrower from your mortgage, for example, you must go through a credit-qualifying streamline refinance. Plus, the additional documentation could result in you obtaining a lower interest rate if your credit has improved over the years.

Guidelines for FHA Streamline

Though you don’t have to go through all of the daunting paperwork, there are a few guidelines that you must understand before jumping into an FHA streamline refinance:

  • This is not an FHA cash-out refinance. You will be limited to borrowing more than $500 from this type of refinancing.
  • You must not be delinquent on your current FHA loan. It is important that your history shows you make your payments on time.
  • You must wait at least six months after your current mortgage is issued to you. The exceptions here are specific, unavoidable life changes, such as an inheritance or a divorce.
  • The FHA streamline refinance must provide a “net tangible benefit” for you as a borrower. You should be lowering your mortgage interest rate and/or reducing your term.
  • You must be able to pay closing costs. Your lender will have to OK the source of your assets if you need cash to cover the costs.

Is An FHA Streamline Right For You?

One of the biggest disadvantages of an FHA streamline refinance is the fact that you will have to pay a new mortgage insurance premium, meaning you will also have to continue shelling out cash for premium monthly payments.

Once you have decided whether or not an FHA streamline is right for you, make sure to get in contact with us here at NESWork. Our goal is to help our clients and customers feel comfortable throughout the refinance process by providing them with oversight and answers to any questions they may have!