What Is an FHA Streamline Refinance Guidelines Pros amp Cons
What Is an FHA Streamline Refinance - Guidelines, Pros & Cons Skip to content
Motley Fool Stock Advisor recommendations have an average return of 397%. For $79 (or just $1.52 per week), join more than 1 million members and don't miss their upcoming stock picks. 30 day money-back guarantee. Sign Up Now Your current mortgage must be FHA-insured. You must have made on-time, in-full mortgage payments for the past 12 months. Your FICO credit score has to be at least 620 or higher. Some lenders require a credit score of 640 or 680 on an FHA loan. You cannot have refinanced within the past 210 days. If you meet these guidelines, you can contact your current mortgage lender to inquire about a streamline refinance. You can also contact other mortgage lenders to compare rates and fees. Different lenders have different loan requirements, so even if one lender turns you down, another may be willing to work with you. In addition to various individual mortgage lender requirements, you need to meet the FHA “net tangible benefit” requirement, which says that refinancing will either help you avoid future mortgage rate increases (refinancing from an adjustable rate mortgage to a fixed-rate mortgage works for this) or will reduce your total monthly payment – including principal, interest, and mortgage insurance – by at least 5%. The interest rate doesn’t have to drop by 5% – just your payment. That can be a catch for many homeowners, because even though you have been paying mortgage insurance premiums with an FHA loan, you need to continue paying them with a refinance. Depending on when you took out your current mortgage, those mortgage insurance premiums could be higher on your new loan and erase any payment reduction achieved with a lower interest rate.
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By Michele Lerner Date September 14, 2021FEATURED PROMOTION
If you have an FHA-insured mortgage on your home, you may have the opportunity to refinance with an FHA streamline refinance. While the hype surrounding the FHA streamline refinance program makes it sound fabulous, the reality is that mortgage lenders often put what are called “overlays” on FHA guidelines. In other words, while the FHA says you can basically refinance your underwater home even if you have bad credit and are unemployed, most lenders require you to meet a certain level of standards. That said, if you have an FHA loan and can qualify for an FHA streamline refinance, it can be a great deal. Just make sure you compare your options for other types of mortgage refinance. Unlike other mortgage refinance options, the FHA streamline refinance program offers borrowers with an existing FHA mortgage a new FHA-insured home loan without requiring an appraisal or any documentation of income or assets. Furthermore, depending on when the current loan was taken out, lower mortgage insurance fees may be available to the borrower.FHA Streamline Refinance Process
Before you take any refinancing steps, make sure you meet the few guidelines established by the FHA:Motley Fool Stock Advisor recommendations have an average return of 397%. For $79 (or just $1.52 per week), join more than 1 million members and don't miss their upcoming stock picks. 30 day money-back guarantee. Sign Up Now Your current mortgage must be FHA-insured. You must have made on-time, in-full mortgage payments for the past 12 months. Your FICO credit score has to be at least 620 or higher. Some lenders require a credit score of 640 or 680 on an FHA loan. You cannot have refinanced within the past 210 days. If you meet these guidelines, you can contact your current mortgage lender to inquire about a streamline refinance. You can also contact other mortgage lenders to compare rates and fees. Different lenders have different loan requirements, so even if one lender turns you down, another may be willing to work with you. In addition to various individual mortgage lender requirements, you need to meet the FHA “net tangible benefit” requirement, which says that refinancing will either help you avoid future mortgage rate increases (refinancing from an adjustable rate mortgage to a fixed-rate mortgage works for this) or will reduce your total monthly payment – including principal, interest, and mortgage insurance – by at least 5%. The interest rate doesn’t have to drop by 5% – just your payment. That can be a catch for many homeowners, because even though you have been paying mortgage insurance premiums with an FHA loan, you need to continue paying them with a refinance. Depending on when you took out your current mortgage, those mortgage insurance premiums could be higher on your new loan and erase any payment reduction achieved with a lower interest rate.