The circumstances of life can change, and nothing is set in stone. Interest rates and the property market are no different. Home mortgage refinancing is a viable option for some people and, depending on your circumstances, can make your home loan more affordable. If the thought of refinancing gives you flashbacks of masses of paperwork and jumping through hoops to appease your lender, you probably haven’t heard about a ‘streamline’ mortgage.
What Is A Streamline Mortgage?
A streamline mortgage is a refinancing option for your existing home loan. Streamline programs offer borrowers a quick and typically less laborious way of refinancing their home.
The Federal Housing Administration (FHA) offers a streamline mortgage program that can lower your interest rates – but only if you have an existing FHA mortgage and plan on using an FHA-approved lender.
What Are The Benefits Of An FHA Streamline Mortgage?
No Appraisal
In a typical refinance, an appraisal is required by the lender to determine the market value of the property. The FHA streamline refinance program offers borrowers an FHA-insured home loan without requiring an appraisal. This is particularly useful for homeowners who are ‘underwater’ on their home loan and owe more on their mortgage than the market value of their property.
Limited Paperwork
When opting for an FHA Streamline mortgage, there is no need to verify your income and assets again. Not having to verify your income can be hugely beneficial for homeowners who have recently found themselves unemployed. In addition, less paperwork means that the turn-around time of FHA Streamline Refinancing can be as little as 2-3 weeks.
Easy to Qualify
FHA refinancing is specifically designed to help homeowners with less than stellar credit scores. Although there is no requirement from the FHA to verify your credit score, lenders tend to prefer it if your credit score is at least 620.
What Are The Draw-Backs Of An FHA Streamline Mortgage?
Time is of the Essence.
To qualify for a streamline refinance you must have owned the property for at least six months. Plus, if your mortgage is less than 12 months old, you must be current and up to date with no previous late payments.
The Sky is Not the Limit
If you opt for an FHA no appraisal loan, the loan amount cannot exceed the current loan. Avoiding an appraisal may not be beneficial to homeowners who have equity in their home. If you are underwater on your home loan, not having an appraisal would be preferred, as it removes one more hurdle in the refinancing process.
Everyone’s a Winner
For the FHA to approve your new refinance deal, it must meet what is known as the “net tangible benefit” requirement. This requirement states that the new loan terms must do one of two things; help you avoid future mortgage rate increases or will reduce your total monthly payment by at least 5%.
A streamline mortgage can be an excellent option for homeowners who are underwater or would have difficulty refinancing conventionally. Alternatively, your individual circumstance may mean that a streamline refinancing option isn’t optimal or beneficial. An experienced mortgage broker can help to guide you through the process of refinancing your home loan and help you to find the right fit.
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