Has anyone refinanced through an FHA streamline loan?
Homeowners with existing FHA mortgages may be eligible for an FHA Streamline Refinance. It is sometimes also called an FHA-to-FHA refinance. This program provides an opportunity to get better mortgage terms at a lower price. You can even use an FHA Streamline if the property is no longer your primary residence.
The program makes it easier to qualify and less expensive to pull off:
- It eliminates the requirement for income and employment verification
- Lenders needn't ask borrowers for bank account and other asset statements
- There are no minimum credit scores
- The program does away with home appraisals
Homeowners can use the program to reduce their FHA mortgage insurance premiums (MIP) and get better terms with their new loans.
The FHA Streamline Refinance program does not require a home appraisal. Instead, the FHA lender assumes that your original purchase price is your home's current value. This can be an advantage if your home's value has fallen or if your mortgage is "underwater."
To qualify for an FHA streamline loan, you must show a history of making mortgage payments on time. There are three basic requirements for your mortgage payment history:
- Your mortgage must be current when you apply for your refinance.
- You must have made your last six months' payments within 30 days of the due date.
- You cannot have been more than 30 days late more than once during the previous year.
If you cannot meet this basic requirement, you'll have to make your payments on time and wait until you do.
The loan you're refinancing must be at least 210 days old, and you must have made at least six payments. This is referred to in the mortgage industry as "seasoning."
Until you have met this requirement, your lender can't even pull a case number from FHA for your new loan.
Those who refinance within the three years of their existing loan's start date can get a refund on previously paid upfront MIP.
The size of the refund diminishes as the three-year window elapses. It starts at 80 percent if you pay off your FHA loan within one month of taking it out, and drops by two percent per month, down to ten percent if you repay it in 36 months.
Streamline Refinance applicants must demonstrate that there's a Net Tangible Benefit in the refinance. That means the refinance will leave you better off than you were before.
Loosely, Net Tangible Benefit for a fixed-rate mortgage is defined as reducing the "combined rate" by at least one-half of one percent.
Although this guarantees that the borrower benefits, keep in mind closing costs. Generally, you can expect to pay between $1000 and $5000 in FHA streamline closing costs, but this amount could be higher or lower depending on your loan amount and other factors.
You may also need to pay a portion of property taxes and insurance at closing. For instance, if your jurisdiction’s property taxes are due in the next few months, your lender will require you pay that tax installment. Keep in mind, however, that you will receive a check from your current lender for taxes and insurance you paid to them but are not yet disbursed.