A full credit report and new appraisal are things that are not required for a streamline refinance. As long as the new loan amount is not more than the balance of the original mortgage, you have a good chance of getting approved much quicker than you would with another form of refinancing. The process is also much easier as there is little documentation required for approval.
Basic Requirements For An FHA Streamline Refinance
-Mortgage being refinanced must already be FHA insured
-The mortgage being refinanced may not be delinquent
-Borrower’s monthly payment must be lowered
-No cash out
There are certain things that need to be taken into account when doing an FHA streamline refinance.
First of all, the mortgage being refinanced already has to be an FHA approved first mortgage. There is no cash out allowed by the borrower, and the purpose of the refinance is to simply lower the borrower’s monthly interest and principal payment. To provide for closing costs, there may be a minor adjustment in the no cash out clause allowing up to an additional $500 above the original loan amount.
The only repairs that are required to be completed when doing an FHA streamline refinance are those that deal with lead based-paint.
If the lender requires any other repairs to be completed by the borrower they must be paid for out of the borrower’s pocket.
FHA streamline refinances don’t require an appraisal, but in cases where an appraisal is done, the maximum insurable mortgage is figured out differently.
Calculating the maximum insurable mortgage amount with an appraisal is the lesser of the following two calculations:
1. Maximum LTV(Loan-to Value) percentages multiplied by appraised value, excluding closing costs.
2.
Sum of existing FHA first mortgage, accrued late charges, prepaid expenses needed for the escrow account, escrow shortages, closing costs and reasonable discount points minus any upfront MIP refund.
Without an appraisal, the maximum insurable mortgage amount is calculated by the lesser of the following:
1. Original loan amount with any upfront MIP and new UFMIP charges included.
2. Existing debt calculation, which is the same as number 2 above but also includes the expense of the new up-front UFMIP.
There are a couple of ways in which lenders can offer an FHA streamline refinance to a borrower.
-No Cost Refinances- No out of pocket expenses to the borrower. All expenses are paid by the lender. This will likely result in a higher interest rate than if the borrower had paid the expenses out of their own pocket.
-Closing Costs Included In New Mortgage Amount- If there is sufficient equity in the property as determined by an appraisal, then the closing costs can be included in the new loan.
This can also be done without an appraisal as long as the new loan amount does not exceed the original loan amount.
Refinancing to lower your monthly payments may not be easier for anyone holding an FHA approved first mortgage. An FHA streamline refinance will be faster and easier than any other type of refinance you can find. While the basic requirements will not change, keep in mind, however, that fees and interest rates will vary from lender to lender.
Rob K. Blake, home loan expert and author, educates mortgage shoppers on finding local providers by state like Tennessee Mortgage Brokers and Lenders and provides reviews of national companies like Accredited Home Lenders.
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