Streamline Refinancing for FHA Mortgages
FHA has permitted streamline refinances on insured mortgages since the early 1980's. The
streamline refers only to the amount of documentation and underwriting that needs to be
performed by the mortgage company, and does not
mean that there are no costs involved in the transaction.
The basic requirements of a streamline refinance are:
The mortgage to be refinanced must already be FHA insured.
The mortgage to be refinanced should be current (not delinquent). The refinance is to
result in a lowering of the borrower's monthly principal and interest payments. No cash
may be taken out on mortgages refinanced using the streamline refinance process.
Companies may offer streamline refinances in several ways. Some companies offer "no
cost" refinances (actually, no out-of-pocket expenses to the borrower) by charging a
higher rate of interest on the new loan than if the borrower financed or paid the closing
costs in cash. From this premium, the company pays any closing costs that are incurred on
the transaction.
Companies may offer streamline refinances and include the closing costs into the new
mortgage amount. This can only be done if there is sufficient equity in the property, as
determined by an appraisal. Streamline refinances can also be done
without appraisals, but the new loan amount cannot exceed what is currently owed, i.e.,
closing costs may not be added to the new mortgage with those costs either paid in cash or
through the premium rate as described above. Investment
properties (properties in which the borrower does not reside in as his or her principal
residence) may only be refinanced without an appraisal and, thus, closing costs may not be
included in the new mortgage amount. |
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