If you already have an FHA loan, the FHA streamlined loan might be a great way to refinance and save money. The program waives much of the documentation banks typically as for, such as bank account, income, employment and credit score verification, and doesn’t require a home appraisal.
Main Benefits of the FHA Streamlined Loan Program
The FHA streamlined loan makes it easy to start saving and offers:
- No income documentation
- Relaxed FICO requirements
- No appraisal
The FHA isn’t concerned with your home value because it’s insuring the loan already. That’s why there no appraisal requirement. The FHA uses your purchase price or the most recent appraisal as the valuation. This means you may be streamline-eligible even if your home is underwater.
What Are the Current Rates?
The 15-year fixed FHA streamlined loan has a 3.49% rate with an APR of just 4.939%, while the 30-year fixed option carries an interest rate of 3.75% with an APR of 5.002%.
How FHA Streamline Refinancing Works
First, the product is limited to those with FHA mortgages. It’s called a “streamlined” loan due to the relaxed requirements. It’s a fast way to start saving on your mortgage and even pay it off faster.
According to the FHA guidelines, in order to qualify for a streamlined refinance, a loan must:
- Lower the interest rate or
- Convert an adjustable-rate mortgage to a fixed-rate loan.
You can also get a higher loan-to-value ratio, so you might qualify even if you haven’t built a lot of equity.
Why You Should Choose an FHA Streamline Loan
Use this financial tool to take advantage of low rates. It’s much simpler than similar refinance options. Conventional refinance loans require income verification and an appraisal as well as a lot of other paperwork.
Understand the Requirements
Review the requirements below carefully before applying.
Be sure that your existing loan is FHA-insured and that you are current on your payments. If you have more than one late payment in the past 12 months, you will not qualify for the FHA streamlined loan. Further, when you apply, the loan officer checks to see whether the last six mortgage payments were paid on time.
There are also guaranteed benefits to you. The refinance must:
- Result in a minimum 0.5 percentage point reduction in the interest rate and Mortgage Insurance Premium or
- Change your financing terms from an adjustable to a fixed rate — the maximum interest increase can’t exceed 2 percentage points above the combined MIP and interest rate
Exceptions
This loan isn’t a good option for those looking to take cash out for renovations since your new loan can’t exceed the amount of your current mortgage. In fact, you cannot receive more than $500 in cash as a result of the refinance.
210-Day Waiting Period
The FHA verifies that your last six mortgage payments are up to date and imposed a 210-day pass waiting period between the closing date of your current loan and your applications for the FHA streamlined loan.
