Are You FHA Streamline Refinance Eligible? (Part 1)

The FHA Streamline Refinance is a mortgage product, set aside for homeowners with who currently have an existing FHA mortgage. Homeowners with conventional mortgages through Fannie Mae or Freddie Mac do not qualify for this type of loan. FHA Streamline Refinances are the fastest, simplest way for FHA-insured homeowners to refinance their homes. This type of refinancing option reduces your monthly expenses by lowering your payments, but there is no option to receive cash back.

The FHA Streamline Refinance program's defining attribute is that it does not require a home appraisal. Instead, your original purchase price is used as your home's value, regardless of the actual current value the home.  This is good news those who are underwater on their mortgage. Even if you owe twice what your home is now worth, the FHA will refinance your home without any additional cost or penalty. The program also allows for unlimited loan-to-value with its Streamline Refinance program

Keep in mind that FHA refinancing is only available to homeowners who are currently using their home as their principal residence, or owner occupied.

Although the FHA Streamline Refinance avoids the "traditional" mortgage verification of income and credit score, the program does implement minimum standards for applicants. The  FHA Streamline Refinance guidelines are as follows:

·         12-Month Payment History Required - One of the qualification standard is that homeowners choosing Streamline Refinance program must have a mortgage payment history for 12 months with no late payments. Loans will need to be current at the time of closing.

·         Waiting Period Between Refinances - The FHA requires that borrowers make 6 mortgage payments on their current FHA-insured loan. After the 210 days waiting period a borrower will be eligible for another Streamline Refinance.

  

·         Employment And Income Are Not Verified - The FHA Streamline program does not require verification of a borrower's employment or annual income as part of the FHA Streamline process. There is no Verification of Employment, nor are there paystubs, W-2s or tax returns required for approval. You can be unemployed and get approved for a FHA Streamline Refinance so long as you still meet the other program requirements. Keep in mind that certain lenders may still request this information in order for them to approve your loan.

·         Credit Scores Are Not Verified - The FHA does not verify credit scores as part of the FHA Streamline Refinance program. Instead, it uses payment history as a gauge for future loan performance. This means that FICOs under 640, are eligible for Streamline Refinances. Certain lenders will still require a minimum credit score in order for your loan to be approved by that specific lender.

·         The Refinance Must Have Benefit to the Borrower - Streamline Refinance applicants must demonstrate that there's a Net Tangible Benefit in the refinance. The purpose must show a legitimate reason such as, reducing your mortgage payment (principal + interest + mortgage insurance) by 5 percent or more.  Even lowering your term to pay off your loan sooner. Another allowable benefit is to refinance from an adjustable ARM into a fixed rate loan. Cash out is not considered a Net Tangible Benefit.

·         Closing Cost May not be Rolled into the Loan Amount -  FHA does not allow  Streamline Refinance loan balances to be raised in order to cover cost to complete the loan. The new loan balance is limited by the math formula of (Current Principal Balance + Upfront Mortgage Insurance Premium). All other costs such as origination charges, title charges, escrow etc., must be either paid by the borrower at closing, or credited by the loan officer or lender to create at zero-cost FHA Streamline.

·         Appraisals Not Required - FHA does not require appraisals for its Streamline Refinance program. Instead, it uses the original purchase price of your home, or the most recent appraised value, as its valuation point. Homes that are underwater are still FHA Streamline-eligible.

  

 FHA rates are low and lender credit is high. Contact me for more information. We have zero-cost FHA Streamline Refinancing available.