In an effort to benefit homeowners who initially utilized a Federal Housing Administration-insured mortgage to purchase a home, the FHA Streamline Refinance program is available. Through the FHA Streamline Refinance option, borrowers can refinance their current mortgage under a simplified process with a variety of lenders to take advantage of several benefits. But first, to qualify for an FHA Streamline Refinance mortgage, you must have a current FHA-insured home loan, be current and on time with mortgage payments for the previous 12 months, have a credit score of at least 620, and not have refinanced within the last 210 days.
One of the issues facing a large number of homeowners who want to refinance is the need for a new appraisal on the home. The appraisal provides your new lender with some assurance that your home’s value is greater than the loan amount you are requesting. With a streamline refinance with FHA, the same appraisal that was used for your initial mortgage loan is used for your new lender to review, making it easier to qualify for the new mortgage even if your home’s value has decreased. As an added bonus, you don’t need to pay the home appraisal fee which ranges from $400 up to $1,000.
Because there is no new appraisal required, the FHA Streamline Refinance process is faster than a traditional refinance loan. An additional time-saving benefit comes in the form of verification of your financial history. Through the program, lenders are not required to check your credit report or verify your income sources. Without this additional paperwork, the turnaround time for an FHA Streamline refinance is relatively quick.
The FHA insures mortgages in order to cover its potential liabilities, and homeowners pay the cost of that insurance in the form of an upfront premium and a recurring premium paid monthly. For homeowners who are refinancing a loan which originated before March 31, 2009, through Streamline Refinance program, the upfront premium equals 0.01% of the loan amount while the annual premium, paid monthly, equals 0.55%. Previously, FHA mortgage insurance cost homeowners 1.75% of the loan amount upfront in addition to 1.25% for the recurring premium. This cost savings can be substantial for qualified homeowners.
In addition to lowered mortgage insurance, a refinance through the Streamline program may also reduce your principal and interest payments each month. If you are able to secure a new FHA mortgage with a lower total interest rate than your initial loan, you could save substantially not only in the immediate term but also over the lifetime of the loan.
The FHA Streamline Refinance program is a valuable tool for homeowners who meet the eligibility requirements. New FHA mortgage loans are available for fixed and adjustable rate terms with repayment periods of either 15 or 30 years, giving homeowners added flexibility when completing the refinance process.
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