That means the FHA is looking for you to reduce your term or lower your mortgage interest rate — or both. Using a mortgage refinance calculator can help you understand the financial trade-off between lowering your payment and adding years to your loan term. The added costs of interest compounded over an additional number of years can significantly outweigh the advantages of a lower monthly payment. While the FHA allows borrowers to increase their loan term by up to 12 years, it has to be offset by a rate reduction.
One potential downside to an FHA streamline refinance: You'll pay a fresh upfront mortgage-insurance premium and continue shelling out monthly premium payments.
The upfront premium is 1. In an FHA streamline refinance, you can wrap the upfront mortgage insurance premium — but no other closing costs — into a higher loan amount as a part of the refinance. Don't forget, the "net tangible benefit" requirement means the numbers have to work in your favor, all costs considered.
Calculating your long-term savings can help you decide whether an FHA streamline refinance is right for you. The FHA offers several refinancing options , including a k refinance for renovations and an FHA cash-out refinance , so it may take a bit of research and some number-crunching to figure out which best meets your needs now and down the road.
What is the FHA streamline program? Home Ownership. If you decide to refinance , you may want to find out if you qualify for an FHA Streamline refinance loan. This type of mortgage program is available to those whose current mortgage is FHA insured.
Check your mortgage loan documents or your credit report to see if your loan meets this requirement. As its name implies, refinancing with an FHA Streamline is easier, but otherwise it is similar to ordinary mortgages.
It can have a or year term and either a fixed or adjustable rate. The FHA Streamline has five main advantages. No appraisal is required. Not only does this save you the cost and hassle of getting an appraisal and worrying about whether it will be high enough, it also allows eligibility even if your loan is currently under water i.
You have the option, however, to use a current appraised value. No verification of income or employment is required. Being currently unemployed or underemployed will not prevent you from refinancing with an FHA Streamline. However, an FHA streamline refinance may not be for everybody.
Homeowners who have improved their credit after purchasing their home or want to cash out from their equity may be able to get more favorable options from a conventional mortgage refinance. The new credit check could prove a better interest rate than opting for the no credit check streamlined process. Even without an FHA streamline loan, Feinman says some properties may qualify for an appraisal waiver, which can save the homeowner in closing costs.
Those who have a newer home, improved credit, and would like to explore buying points to reduce the interest rate may want to consider a traditional refinance instead. In most cases, to qualify for a prorated MIP refund you must refinance to another FHA loan within the first three years.
In many ways the FHA Streamline Refinance program works similarly to other refinance options , but there are some key differences. It is designed to provide a financial benefit to current FHA borrowers, usually in the form of a lower monthly payment or by converting an adjustable interest rate into a fixed rate.
It also has simplified qualification standards. In lieu of a credit check and income verification you just need a track record of making on-time payments. You must have no late payments in the past three months. Individual lenders may have lending standards above these requirements and you could be denied for the loan with any late or missed payments. When you refinance under the FHA Streamline Refinance program you will still be required to pay the upfront mortgage insurance payment and an ongoing annual mortgage insurance premium MIP.
Most FHA loans will have an upfront fee of 1. You do have to pay closing costs with an FHA Streamline refinance. Unlike with other types of refinance loans, you cannot roll the closing costs into the new loan.
When you take advantage of the FHA Streamline Refinance program, it does not remove the mortgage insurance payment from your loan. And in most cases, you will also be responsible for an upfront MIP of 1. Instead, you must be up to date with your payments and have a history of on-time payments. There are FHA cash-out refinance loans available, but they have qualification requirements of standard refinance loans.
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