If you’re like many consumers, you may think that “streamline” FHA mortgage refinance programs are those that have no costs associated with the transaction. In fact, “streamline” mortgages don’t refer to cost, but rather to the amount of underwriting and documentation executed by the lender.
HUD has permitted streamline FHA mortgage refinancing since the 1980s. The goal of a streamline FHA mortgage refinance is to lower the borrower’s monthly principal and interest payments. Like other types of mortgage programs, there are some basic requirements that FHA streamline mortgages must meet.
First of all, the refinance in question must already be FHA-insured, and should be a current mortgage, not a delinquent mortgage. While on traditional refinances the borrower is permitted to take cash out, on streamline FHA mortgage refinancing no cash may be taken out.
There are several different ways that streamline FHA mortgage refinancing is offered.
“No-cost” refinances mean that the borrower isn’t required to come up with any out-of-pocket expenses. In this situation, the borrower pays a higher rate of interest on the loan than if the closing costs had been paid in cash or rolled into the loan. However, the rates are still lower than those on the current mortgage.
How does this work? Well, instead of paying the closing costs in cash or financing them as part of the loan, the borrower finances them into the interest rate. This allows the lender to credit most—and sometime all—of the closing costs associated with the loan.
It’s also possible for the borrower to streamline fha refinance and roll the closing costs into the new mortgage amount. However, in order to do this the borrower must have enough equity in the property. The amount of equity is determined through a FHA refinance appraisal.
Can a streamline FHA refinancing be done without an appraisal?
The quick answer is yes, it can be. However, the new loan amount can’t exceed what is currently owed. This means that closing costs can’t be added to the new mortgage. Instead, closing costs may be paid in cash, or may be paid through the premium rate in which they are added to the loan’s interest.
When it comes to investment properties, closing costs aren’t permitted to be included in the new FHA mortgage refinance amount, and the property can only be refinanced without an appraisal. In addition, the new loan amount can’t be more than the maximum loan amount stipulated for the type of property, as well as the area it’s located in. Investment properties are defined as any property in which the borrower doesn’t live in as a principal residence.
If you’re a current FHA borrower and would like more information on the streamline FHA mortgage refinance program, call or email me. The streamline FHA mortgage refinancing program is an option for any current FHA borrower looking to lower monthly principal and interest payments.
