What is FHA Streamline Refinancing?
An FHA Streamline Refinance is a simplified way for FHA borrowers to get lower interest rates and smaller monthly payments.
The catch is, not every FHA borrower is qualified – and sometimes another loan program may help you refinance.
As always, you need to look for your best refinancing offer.
This is especially true if a lender has contacted you about an FHA Streamline Refi. You should never accept an unsolicited refinancing offer at face value.
First, do your research to make sure you understand what the offering entails. Decide if refinance is really worth it for you and check with other lenders to see if you can find a better deal elsewhere.
Check your FHA Streamline Refinance eligibility (December 8, 2020).
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Information on the FHA Streamline Refinance Program
Perhaps you have found the FHA Streamline Refinance yourself and are wondering if this is a good idea.
Or, you have been contacted by a lender who offers extremely low refinance rates and great monthly savings.
In this case, it is not uncommon to wonder if the FHA Streamline program is a scam.
While it sounds too good to be true, the FHA Streamline is a perfectly legitimate refinance program that is backed by the Federal Housing Administration. It can provide a simplified application process with few documents and below market prices.
However, you must be a qualified homeowner with a current FHA loan to take advantage of this program.
You should review all of your options before using an FHA streamline as a different refinance program may help you save more.
This is how you can evaluate the FHA Streamline program and find out if it is the right refinance loan for you.
Check Your FHA Refinance Rates (December 8, 2020)
Benefits of FHA Streamline Refinancing
An FHA Streamline is one of the easiest refinancing programs to qualify, with minimal documentation and no home valuation required.
If you have a recent FHA loan and have made full and timely mortgage payments, you may be able to qualify for an FHA Streamline refinance.
You must have an existing FHA backed mortgage. You must have payment on time. You must wait at least 210 days after home purchase or refinancing to use the FHA streamline. The new loan must have a clear monetary benefit – a "material net benefit" – to be eligible
These FHA Streamline requirements primarily apply to your existing mortgage.
When it comes to borrower requirements, FHA is pretty lenient.
The lender does not have to verify your income or employment. The lender doesn't need to check your credit history or check your credit report (although some can do it anyway). A house evaluation is not required
With so few documents required, an FHA Streamline loan can be completed faster than a traditional refinance. And you'll likely save money on closing costs because you won't have to pay for a new home appraisal.
Check your FHA Streamline Refinance eligibility (December 8, 2020).
When is the FHA Streamline a good idea?
The simplest answer is, if an FHA Streamline refinance can significantly lower your interest rate and monthly payment, this is probably a good idea.
But refinancing is of course never that easy. There are many different ways to compare the costs versus the benefits of mortgage refinancing.
Here are some questions to help you evaluate your current FHA loan, your potential new loan, and your savings opportunities through the FHA Streamline or any other refi program.
How much interest can I save?
How much you save depends on your current and new interest rates. Your new plan will depend on the market and the lender you want to work with.
Given that mortgage rates are at or near record lows today, it is at least worth investigating what rate might be available in your situation.
To get the best deal available, you should check out a few different mortgage lenders. Prices can vary greatly from company to company so you won't always get a lower rate from your current lender (or whoever sent you a flyer or email with big savings).
The only way to know which lender has the best FHA Streamline rates is to apply with at least 3-5 and pick your lowest offer.
Is it worth using a lower interest rate for a refinancing?
A lower interest rate is not always worth it.
You want to see how many months it will take for the loan savings to offset your closing costs. If you stay home past the break-even point, you will see real savings.
You should also watch out for lenders who define "savings" as the difference between your new and old payments.
Look out for lenders who define "savings" as the difference between your new and old payments. However, it is possible to lower your monthly payment increase Your long term costs.
Remember, refinancing your loan will start over. So it is often possible to lower your monthly mortgage payments, but it really is increase Your total costs, as you spread the loan balance and interest payments over a new term of 30 years.
In addition to a lower interest rate and monthly payment, there may be other reasons to refinance.
For example, the FHA allows refinancing from a variable rate mortgage to a fixed rate mortgage according to the Net Netible Benefit Rule.
If your current FHA loan is an ARM and you want to secure fixed income funding at low interest rates today, it may be possible through FHA Streamline Refinance.
Check your new plan (December 8, 2020)
What happens to the FHA mortgage insurance premiums?
Remember, FHA is not a lender. It's an insurance plan. To access the benefits of FHA financing, borrowers must pay the mortgage insurance premium (MIP).
The FHA has two types of mortgage insurance, both of which apply to FHA Streamline Refinance loans:
The prepayment premium for mortgage insurance (prepayment MIP) is 1.75% of the loan amount. The annual mortgage insurance premium (annual MIP) is equal to 0.85% of the loan amount divided into monthly installments
Refinancing through the FHA Streamline program will not cancel your mortgage insurance. But it can help you lower your MIP rate.
Homeowners who received an FHA loan between 2010 and 2015 may still pay a 1.35% annual MIP rate. In these cases, refinancing at a lower interest rate and a lower MEP rate of 0.85% could result in significant monthly savings.
There are even cheaper rates when a Streamline Refinance is used to replace an FHA loan taken on or before June 1, 2009.
Homeowners with older FHA loans should consider refinancing with a traditional loan to get rid of MIP.
For older loans, the upfront MIP is 0.01% ($ 10 for a loan balance of $ 100,000) while the annual fee is 0.55%.
That sounds like a big savings, but in practice, borrowers with older FHA loans may do better with a different type of loan.
This is because property prices across the country have increased significantly since 2009. Many borrowers with older FHA loans have at least 20% equity and can refinance without mortgage insurance.
If you have at least 20% home equity, refinancing from an FHA loan to a traditional loan can cancel your mortgage insurance entirely and help you save more in the long run.
Was your original FHA loan opened before June 3, 2013?
Prior to June 3, 2013, the FHA had termination insurance that allowed borrowers to end MIP coverage in just five years. This could only happen if the loan balance had dropped to 78% of the original debt.
Now the story is different.
If you borrow with at least a 10% decline, the FHA-MEP can be canceled within 11 years. If you take out a loan with less than a 10% decline – as most FHA borrowers do – the annual MEP will stay in place for as long as the loan is outstanding
For those with an FHA loan prior to 2013, refinancing to a new FHA loan could include mortgage insurance that never goes away.
Instead of jumping into an FHA Streamline refinance, consider looking at all of the options.
If you have at least 20% equity and 620 loans, you may be able to refinance directly into a traditional loan No private mortgage insurance (PMI).
If you have strong credit but haven't quite reached 20% equity, you may still want to refinance into a traditional loan. PMI can be canceled once you reach 20% equity – unlike FHA mortgage insurance, which can only be removed by refinancing.
Find The Right Refinancing Loan For You (December 8, 2020)
Why is the FHA offering streamline refinancing?
A low-doc refinance program with extremely low mortgage rates may sound too good to be true. In fact, however, it is in the interest of the Federal Housing Administration to offer streamline refinancing.
The FHA may easily prefer lower interest rates as it is an insurance plan and not a lender. The agency has no incentive to keep borrowers in high interest loans as it does not benefit from the interest rates on FHA loans.
Lower interest rates mean lower monthly mortgage payments for the FHA. Smaller payments are easier to handle for borrowers. And that means fewer claims against the mortgage insurance program.
By helping homeowners refinance into cheaper home loans, the FHA really protects itself from paying private lenders for defaulted loans.
What are the disadvantages of FHA Streamline Refinancing?
There are several requirements that can make an FHA Streamline Refinance unattractive.
First, the FHA Streamline program allows you to refinance your existing FHA loan balance, but does not allow withdrawal refinancing.
If you want cash and have at least 20% equity, check out the FHA Payout Program or Non-FHA Programs. The attraction of non-FHA programs is that with 20% equity, you don't need mortgage insurance, which saves a lot of money.
Second, the FTA does not allow rationalization refinancing unless it produces a net material benefit. This is to protect the borrowers from unscrupulous loan offers.
What are the downsides? You need to have a good credit history; You must meet the FHA definition of "net material benefit". and no withdrawal is allowed.
These benefits can include a reduction in interest rates of at least 0.5%, a change from floating rate to fixed rate financing, or a shorter loan term.
However, FHA guidelines can be complicated. For example, if you are moving from an ARM to a fixed rate loan, increased monthly costs are allowed.
In addition, your existing FHA loan must be up to date. The last three mortgage payments must have been paid in full and on time. It must have been at least 210 days since your current loan was taken out. and you must have made at least six payments on your existing loan.
For details and specifics, speak to the loan officers and compare FHA Streamline refinancing offers.
Today's FHA refinance rates
Mortgage rates are consistently low. This includes the rates for the FHA Streamline refinancing.
Even though the FHA Streamline does not require loan approval, your rates will vary from lender to lender. So it's worth looking for the best deal.
Compare FHA Streamline Interest Rates from at least 3 lenders to ensure you are getting the lowest interest rate and lowest monthly payment on your new loan.
Check your new plan (December 8, 2020)