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Saturday, March 30, 2013

FHA Streamline Refinance

By Daniel Duffield

FHA streamline refinancing has many advantages over traditional FHA refinancing. If you want to refinance an FHA loan the usual way, you’ll have to wade through a seemingly endless sea of paperwork before closing your new loan. Credit checks, debt to income ratios, employment verification, and other common requirements eat up time and create stress and confusion. The FHA streamline refinance eliminates many of the complex steps involved, allowing you to get your new loan and your lower interest rates without delay.

What is an FHA Streamline Refinance?

An FHA streamline refinance is a unique type of refinance transaction available solely to borrowers with FHA-insured mortgages. The streamlined process essentially bypasses the difficult steps involved in securing an FHA loan from a lender, making it much simpler and quicker than traditional refinancing.

What are the advantages of FHA Streamline Refinancing?

No verification. Streamlined refinancing applications require no verifications of employment, income, or credit score. As a result, the process is relatively quick and convenient when compared to the lengthy process of borrowing FHA insured loans.

No Appraisal. The defining characteristic of an FHA streamline refinance is that it does not require an appraisal of property; instead it utilizes the original price of the property, greatly benefiting underwater homeowners who owe much more than the current worth of their homes.

What are the requirements of FHA Streamline Refinancing?

FHA-Insured Loan
Only borrowers with FHA-insured loans qualify for FHA streamline refinancing, however, borrowers with conventional mortgages may still opt for traditional FHA refinancing.

Payment History
In order to reduce its own risk, the Federal Housing Administration requires that homeowners who intend to use the program must have a spotless payment history for at least twelve months prior. Loans must be current at the closing date without any late payments for the previous year.

Waiting Period
The FHA requires that borrowers wait 210 days from the most recent closing date and make a minimum of 6 mortgage payments on their current FHA loan to qualify.

Costs and Fees
The FHA strictly forbids the increasing of a Streamline Refinance loan balance in order to pay associated loan fees. All costs must be paid by the borrower as cash at closing or fully credited by the loan officer.

Net Tangible Benefit
Finally, borrowers who apply for FHA streamline refinancing must demonstrate that the refinance will result in a Net Tangible Benefit, or a benefit which outweighs the cost of undergoing the refinance process. Essentially, borrowers must benefit from the refinancing process in some way. One example of a Net Tangible Benefit would be a borrower reducing the cost of the principal, interest, and mortgage insurance by 5% or more; because the borrower gains something from the transaction, this refinance would qualify.

Do I have to pay for mortgage insurance?

As with FHA-insured loans, FHA streamline refinancing requires borrowers to pay for mortgage insurance. Rates for FHA streamline refinancing differ depending on the date which the loan was endorsed. Loans older than June 1, 2009 are considered “grandfathered” and feature considerably lower rates than those endorsed after June 1, 2009.

What other refinance options are available with FHA-insured loans?

FHA Rate/Term Refinance. The FHA Rate/Term Refinance allows borrowers with a conventional fixed rate loan or an FHA adjustable rate mortgage to refinance into a fixed rate FHA mortgage. This type of refinancing best fits borrowers with conventional mortgages that have high interest rates; by switching to FHA fixed rate, these borrowers can decrease their interest rates and payments altogether.

Cash Out FHA Refinancing. Cash out refinancing allows the borrower to take out cash from a refinancing transaction. By definition, a cash out mortgage is any new mortgage with funds that are used to pay for anything other than a pre-existing first mortgage and the associated closing costs of the loan. Consider this option to obtain a new mortgage for more than the amount still owed on the original mortgage. However, the amount of cash that you will be able to withdraw cannot exceed 85% of the home’s appraised value.

Zero-Cost Refinancing. Zero-Cost FHA refinancing is a refinance transaction in which the expenses involved in securing the loan, such as upfront fees and closing costs, are included in the loan balance rather than paid at the time of closing the loan. This enables borrowers to close a loan even when they are unable to afford the associated fees. While immediately beneficial to some, adding these charges into the loan balance costs more in the long run, so depending on your financial standing, you should consider paying upfront when possible.

Non-FHA to FHA Refinancing. For borrowers whose current mortgage is not FHA-insured, refinancing into an FHA loan is entirely possible and can be quite beneficial. However, this process cannot be streamlined as with a pre-existing FHA mortgage and consequently requires the necessary paperwork involved in securing a standard FHA loan. Fortunately, FHA refinancing is still faster, simpler, and more convenient than conventional mortgage refinancing, and credit requirements do not factor in as heavily.

My name is Scott Grebner and I have been helping my clients realize their own personal real estate dreams. Real estate is a relationship-based business that works best when client relationships are built on trust and confidence. My goal is having clients be completely satisfied with the professional and caring service they have received.

The role of technology is rapidly changing how the real-estate market functions in this country today. Gerharter Realtors is embracing these new mediums of communication to better serve our customers. We have created our e-family to better place important information in your hands to help you with your housing needs. As a part of Gerharter Enterprises we have access to a broader range of additional services and resources to better assist you. Visit me at my Web Site, Blog, Facebook, Twitter, You Tube or Pinterest. Please check out our helpful resources on Sellers Tips, Buyers Tips, Foreclosure Tips, and Mortgage Tips. For a personal consultation please visit our Office.

It seems that the dream of past generations was to pay off a mortgage. The dream of today’s young families is to get one. I would love to hear from you, about your Real Estate Dreams and questions.

Email me at scott@gerharterrealtors.com.

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