Streamline refinance is in reference to having a current mortgage that is FHA insured. This kind of mortgage requires the borrower to have limited documentation to show credit history and limited underwriting is needed. These refinance loans are available to borrowers who qualify or not qualify with their credit rating. When such a loan is streamlined, there is not much documentation required, but there are still costs involved.
Some of the fundamental requirements for a streamline refinance loan are:
- The existing mortgage must already be insured as a FHA loan
- The mortgage must not be delinquent and must be current
- The results of the refinance must be tangibly beneficial to the borrower. This means that the new terms and interest rate must make sense and must be better than the first
- The borrower cannot not take out cash of more than $500 on a refinanced mortgage with use of the streamline refinancing process
Different lenders offer the streamline refinancing process in different ways. There are some lenders that do not attach any out of pocket cost to the borrower, but they charge a higher interest rate on the new refinance loan. However, there are other lenders that will add a closing cost, but it has to be paid in cash. FHA loans don’t add closing costs to new mortgages when they are investment properties.
There are several benefits to applying for a FHA streamline refinance loan and these include:
- Lower interest rates averaging 2.125%
- Low annual mortgage insurance premium (MIP), if you obtained the loan between the years 2010 and 2015
- There is no appraisal necessary
- You could be eligible for one of these loans, if you have recently been unemployed or have had your wages lowered
- You could qualify with low credit scores. The lender does not check your credit
The best way to be considered for a FHA streamline refinance loan is if you already have a mortgage financed as a FHA loan. This is ideal, if you want to lower your monthly premiums and interest rate. In addition, you don’t have to verify credit or income and the paperwork is limited.