With low-interest rates in the market today, it’s no surprise that many homeowners are considering refinancing. Refinancing can lower your interest rates and monthly payments. Unfortunately, the traditional process of refinancing can also be frustrating, which may make you want to avoid it. Fortunately, the process of refinancing and securing a lower rate can be easy – thanks to the FHA Streamline Refinance solution.
Designed to help FHA mortgage borrowers get lower rates and to help those with adjustable rate mortgages get into fixed-rate loans, the Streamline Refinance option lets you bypass much of the work necessary for a new loan or a conventional refinance.
A Streamline Refinance allows for a refinance where:
- No credit report is required.
- No employment verification is needed.
- No appraisals are required (but the lender may request one if desired)
How Can I Get an FHA Streamline Refinance?
You can qualify for an FHA Streamline Refinance if you meet the following requirements:
- The home loan you currently hold has to be insured by the FHA.
- Your payments on that home loan have to be current.
- The home in question has to be your primary place of residence.
- Either this refinance loan must reduce your monthly payments and/or rates or it must be your means of transitioning an adjustable rate (ARM) to a fixed-rate.
- Your home loans cannot be newer than 7 months old.
Can You Take Cash Out?
Unlike several refinance programs, the Streamline FHA Refinance option does not allow you to withdraw cash. The only exception is with any minimal fees due at closing that total to $500. If you would like to pursue cash out refinance program instead of a streamline loan, the FHA offers a solution with a cash-out refinance option.
What Happens If I Don't Qualify?
Not everyone with an FHA loan will qualify for a Streamline Refinance. For example, people who recently moved into a property, assuming the FHA loan from the last owner in the process, would not qualify.
If you find yourself in this situation, the FHA offers an alternate version of the refinance program referred to as a credit qualifying streamline refinance. This version requires some paperwork – credit reports, income documentation, and debt-to-income ratio calculations – but it’s still largely considered a better alternative to standard refinance loans, but only if:
- Your total number of 30-day late payments in the previous two years is no greater than two.
- You can show that you’ve had at least two years of steady employment
- You can show that your income has been constant or improved within the last two years.
- You have not filed for bankruptcy within the last two years.
- Your new mortgage payment would not be greater than 30% of your gross monthly income.
Additional Benefits to an FHA Refinance
In addition, cash-out, which is offered with some FHA refinance loans, you will find several more advantages of an FHA refinance:
- If you’ve paid your loan in full, you may be able to take out up to 85% of your property's value.
- If you still owe a significant amount of your current mortgage, you will be allowed to refinance as much as 96.5% of the value of your property.
- Even if you have a credit score as low as 620, you may still qualify for competitive rates on an FHA refinance.
- Even if you’ve experienced a bankruptcy, you may still qualify for an FHA refinance, as long as that bankruptcy is more than 12 months-old.
- Even if you’ve had a foreclosure, you may still qualify for an FHA refinance, but only if that foreclosure occurred at least three years ago.
With all these advantages and low-interest rates, now is your time to discover the opportunities provided by an FHA refinance.