Streamline
Refinancing for FHA Mortgages
One
of the best deals in the world for homeowners!
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.
